South Africa’s rand gained, snapping a three-day losing streak, and bond yields fell from 19-month highs amid speculation the Federal Reserve will tomorrow provide guidance on plans to withdraw stimulus.
U.S. 10-year yields dropped from the highest level in more than two years before the Fed publishes minutes of its July meeting. Yields have climbed amid speculation the economy is strong enough to prompt the central bank to slow stimulus as soon as next month, damping demand for higher-yielding emerging-market assets. South Africa’s inflation rate probably rose above the upper limit of the Reserve Bank’s target in July, a report may show tomorrow.
“Our market is just tracking a moderation in U.S. yields,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg. “You’d expect some moderation coming through after such as sharp move as we’ve had in recent days.”
South Africa’s currency appreciated 0.7 percent to 10.1383 per dollar as of 2:49 p.m. in Johannesburg, rebounding from an earlier decline to the weakest level since July 8. Yields on benchmark 10.5 percent bonds due December 2026 dropped seven basis points, or 0.07 percentage point, to 8.53 percent after rising earlier to 8.66 percent, the highest level since January 2012.
Fed policy makers led by Chairman Ben S. Bernanke are contemplating how to end a third round of quantitative easing. The central bank will stop purchases in mid-2014, according to the median estimate in a Bloomberg survey of 48 economists conducted Aug. 9-13. The Fed next meets Sept. 17-18.
Foreign investors sold a net 1.94 billion rand ($190 million) of South African bonds yesterday, the most in a day since June 25, JSE Ltd. data show.
South Africa’s consumer price index probably climbed to 6.2 percent in July, above the central bank’s 3 percent to 6 percent target range, according to the median estimate of 22 economists in a Bloomberg survey. Rising inflation may prompt South Africa’s central bank to lift its benchmark repurchase rate from a three-decade low 5 percent.
“Locally, all eyes are on tomorrow’s inflation data,” Nalla said. “A higher-than-expected reading could be rand-supportive” as it fuels expectations of higher interest rates, he said.