The rand weakened for a fifth day against the dollar and South African yields rose after U.S. jobs data damped outlook for Federal Reserve stimulus, sparking the biggest weekly selloff in the nation’s bonds in 4 1/2 months.
Foreign investors sold a net 2.05 billion rand ($198 million) of South African bonds on Nov. 8, the most in a day since June 25, according to JSE Ltd. data. U.S. payrolls rose by almost twice as much as economists projected, according to a Labor Department report released the same day. South African retail sales growth probably slowed in September, a report may show on Wednesday.
“Friday’s non-farm payrolls report surprised markets to such an extent that a number of forecasters are now suggesting the Fed may reduce its monthly asset purchases as early as its December meeting,” Theuns de Wet, head of global markets research at Rand Merchant Bank in Johannesburg, said in an e-mailed note. “Not only has the shift in market expectations driven the dollar stronger, it also hit U.S. Treasury yields,” damping demand for South African bonds and the rand, he said.
The currency depreciated 0.2 percent to 10.3554 per dollar as of 4:18 p.m. in Johannesburg, bringing its decline in the past five days to 2.2 percent. Yields on bonds due December 2026 climbed six basis points, or 0.06 percentage point, to 8.33 percent, the highest on a closing basis since Sept. 10.
Fed Bank of Minneapolis President Narayana Kocherlakota and Atlanta peer Dennis Lockhart may give clues on the outlook for stimilus when they speak tomorrow. U.S. employers added 204,000 workers in October, compared with a Bloomberg survey median for a 120,000 gain.
The pace of expansion in South African retail sales probably decelerated to 2.5 percent in September from 3 percent a month earlier, a report may show on Wednesday, according to the median estimate of 13 economists in surveyed. The Reserve Bank left its benchmark repurchase rate unchanged at 5 percent since a surprise cut in July last year to support the worst growth in Africa’s biggest economy since the 2009 recession.
“The bias in retail sales growth is broadly tilted towards weakness,” Bruce Donald, a strategist at Standard Bank Group Ltd. in Johannesburg, wrote in an e-mailed note. “We expect that the Reserve Bank will leave policy settings unchanged” when it meets on Nov. 21, he said.