Rand Weakens After Record Streak of South African Bond Outflows

South Africa’s rand headed for its worst weekly decline in five, fueled by the longest stretch of bond outflows on record, as continued signs of growth in the U.S. boosted speculation the Federal Reserve will curb stimulus.

The U.S. will report monthly payrolls data after better-than-estimated jobless claims and economic growth figures yesterday spurred concern the Federal Reserve may bring forward the reduction in bond purchases that have increased demand for riskier emerging-market assets. Foreign investors dumped South African bonds for a 12th straight day yesterday in the longest streak of sales since Bloomberg began compiling data from the Johannesburg Stock Exchange in 1996.

“We had numerous strong U.S. data points this week, including jobless claims, gross domestic product and new home sales,” John Cairns, a currency strategist at FirstRand Ltd.’s Rand Merchant Bank unit, said by phone from Johannesburg today. “Most emerging markets came under pressure.”

The rand dropped 0.4 percent to 10.4881 per dollar as of 11 a.m. in Johannesburg after weakening to as much as 10.5389 yesterday, the worst intraday level since March 2009. The currency is down for a fifth straight day, heading for a weekly decline of 3 percent, the worst performer among 16 major and 24 emerging-market currencies tracked by Bloomberg. Yields on rand-denominated government bonds due December 2026 fell one basis point, or 0.01 percentage point, to 8.44 percent.

Mandela Impact

The Johannesburg Stock Exchange paused trading for five minutes at 11 a.m. to pay respect to Former President Nelson Mandela, who died yesterday.

“While his passing will certainly have an impact on market conduct, it shouldn’t be a factor that weighs negatively on pricing in domestic financial markets,” Cairns said.

Foreigners sold a net 1.67 billion rand ($159 million) of bonds yesterday, bringing the selloff this month to 5.14 billion rand, according to the Johannesburg Stock Exchange. Africa’s largest economy relies on capital inflows to fund its current-account gap, which swelled to a four-year high in the third quarter.

The deficit on South Africa’s current account, the broadest measure in the trade of goods and services, widened to 6.8 percent of gross domestic product in the three months through September from a revised 5.9 percent the previous quarter.

The economy will probably expand 1.9 percent this year, the slowest since a 2009 recession, according to central bank estimates, short of the more than 5.4 percent the government estimates is needed to cut a 24.7 percent unemployment rate. Labor strikes over wages at the country’s mines and automotive-manufacturing plants curbed exports and shaved 0.5 percentage point of economic growth this year, according to the government.

To contact the reporter on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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