The rand strengthened for a fourth day, the longest streak in more than a month, as China’s biggest economic reforms since the 1990s buoyed the outlook for South African exports to the world’s second-biggest economy.
Chinese leaders pledged to allow more private investment in state-controlled industries and expand farmers’ land rights as the ruling Communist Party seeks to sustain growth. China is the biggest buyer of South African raw materials, accounting for about 12 percent of exports, according to government data. The central bank in Africa’s biggest economy will hold its repurchase rate this week to support growth amid signs inflation is slowing, according to a Bloomberg survey.
“We are disinclined to chase rand weakness at current levels,” Bruce Donald, a currency strategist at Johannesburg-based Standard Bank Group Ltd., said in e-mailed comments. “Signals regarding global growth are looking somewhat brighter,” while China’s “master plan” is positive for South African markets, he said.
The rand appreciated 0.7 percent to 10.0947 per dollar by 4:15 p.m. in Johannesburg, paring its loss for the year to 16 percent, the worst among 16 major currencies tracked by Bloomberg. Yields on bonds due December 2026 dropped two basis points, or 0.02 percentage point, to 8.08 percent after falling 23 basis points last week.
South Africa’s inflation rate probably slowed to 5.7 percent in October from 6 percent the previous month, a report may show on Nov. 20, according to the median estimate of 23 analysts in a Bloomberg survey. That would be within the Reserve Bank’s 3 percent to 6 percent target range. The bank’s Monetary Policy Committee meets a day later to review interest rates that have been on hold since a surprise 50 basis-point cut to 5 percent in July 2012.
Consumer confidence in South Africa gained one point to minus 7, a rate that’s still near a decade low, First National Bank said in a statement today. Retail-sales growth slowed to 0.2 percent in September, a report showed last week.
“The question is whether the Reserve Bank will follow in the footsteps of other central banks, which have become more dovish in recent weeks,” Carmen Nel, a fixed-income analyst at Rand Merchant Bank in Cape Town, said in e-mailed comments. “In-target inflation and slowing growth could very well tip the bias” toward a more dovish outlook, boosting bond prices, she said.