Rand Gains as Foreigners Halt Sale of South African Bonds
The rand gained for the first time in three days as foreigners purchased more South African bonds than they sold. Bond yields declined for a third day.
Foreign investors bought a net 905 million rand ($90 million) of local bonds, paring the month’s selloff to 7.8 billion rand, according to data from the Johannesburg Stock Exchange.
“This is the first decent buying in two weeks,” John Cairns, a Johannesburg-based currency strategist at FirstRand Ltd. (FSR)’s Rand Merchant Bank, wrote in an e-mailed note to clients today. “One day doesn’t make a trend, particularly with this volatile series, but yesterday’s buying does at least suggest that the aggressive selling has stopped.”
The rand has lost 16 percent against the dollar this year, making it the worst performer among 16 major currencies tracked by Bloomberg. It appreciated 0.6 percent to 10.0457 per dollar by 10:11 a.m. in Johannesburg, taking its advance this month to 0.5 percent, the best among 24 emerging-market peers tracked by Bloomberg after the Hungarian forint.
Yields on 10.5 percent rand-denominated government debt due December 2026 fell eight basis points, or 0.08 percentage point, to 8.07 percent, the lowest in more than a week. Forward-rate agreements starting in four months, used to speculate on interest rates, declined for a fifth day to 5.29 percent from 5.32 percent yesterday.
South Africa’s central bank won’t necessarily raise interest rates to ward off inflationary pressures as the country’s economy remains weak, Reserve Bank Governor Gill Marcus said yesterday. Inflation measured 5.6 percent in May, compared with 5.9 percent the previous month, according to the country’s statistics agency.
Statistics South Africa, based in Pretoria, may today say that producer-price inflation in May slowed to 5.2 percent in May from 5.4 percent the previous month, according to the median estimate of 12 economists surveyed by Bloomberg.
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