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Rand Weakens Versus Dollar Before Fed Meeting as Yields Rise

Jan. 30 (Bloomberg) -- The rand declined before U.S. Federal Reserve policy makers end a two-day meeting, shrugging off higher-than-expected credit growth data.

South Africa’s currency weakened as much as 0.5 percent weaker at 9.0677 a dollar at 4:21 p.m. in Johannesburg. Yields on benchmark 6.75 percent bonds due March 2021 rose one basis point to 6.60 percent.

Federal Reserve Chairman Ben S. Bernanke will push on with purchases of $40 billion a month of mortgage bonds and $45 billion a month of Treasuries, according to a Bloomberg survey of 44 economists. The central bank has already scooped up $2.3 trillion of Treasuries and mortgage-related bonds since 2008. Monetary easing boosted demand for South African bonds, with inflows hitting a record 93.5 billion rand ($10.3 billion) in 2012.

The rand is in a “fairly constricted range in uncertain trading” before the Federal Open Market Committee’s announcement, William van Rijn, a currency trader at Nedbank Group Ltd. in Johannesburg, said by phone. “It’s just a case of the market preparing itself for this evening with the FOMC,” he said.

Fed policy makers said they may end their $85 billion monthly bond purchases in 2013, with members divided between a mid- or end-of-year finish, according to the record of the FOMC’s Dec. 11-12 gathering.

The rand pared losses after a report showed credit growth accelerated at the highest rate in four years in December, limiting the central bank’s room to cut borrowing costs. The currency later retreated.

Borrowing by households and companies rose 10.1 percent from 9.6 percent in November, according to the Pretoria-based Reserve Bank. The median estimate of 15 economists surveyed by Bloomberg was 9.7 percent.

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

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

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