The rand weakened for a third day, the most among major currencies against the dollar, and South African bonds pared gains after the U.S. economy grew more than forecast, fueling speculation of a reduction in stimulus.
Gross domestic product, the value of all goods and services produced, rose at a 1.7 percent annualized rate in the second quarter after a 1.1 percent gain the prior quarter, Commerce Department figures showed today in Washington. The median forecast of 85 economists surveyed by Bloomberg called for a 1 percent advance in the April to June period. South Africa’s trade deficit narrowed in June, a report showed.
“The end of quantitative easing is in sight,” Ion de Vleeschauwer, chief dealer at Bidvest Bank Ltd., said by phone from Johannesburg. “There’s only one thing to do when that happens and that is to buy dollars.”
The currency depreciated 1.3 percent to 9.9249 per dollar at 3:47 p.m. in Johannesburg, the biggest one-day decline since July 5. Yields on benchmark 10.5 percent bonds due December 2026 were unchanged at 8.18 percent after dropping as much as two basis points, or 0.02 percentage points.
Investors are awaiting guidance from the Federal Reserve, which announces its interest-rate decision today after a two-day policy meeting. The Federal Open Market Committee has said it may reduce asset purchases this year if the economy improves in line with its forecasts.
“Any slight change in wording will be picked apart for signs of how the Fed’s views on the economy are changing and when and how they are likely to start tapering,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. The rand will “be sensitive to the smallest change in tone towards tapering,” he said.
South Africa’s trade deficit narrowed to 7.7 billion rand ($781 million) from 11 billion rand in May, less than the median estimate of 10 economists in a Bloomberg survey, which predicted an 8.9 billion-rand gap.