Rand Advances First Day in Four Before ECB, BoE Rate Decisions
The rand gained for the first time in four days as stocks and commodity prices rebounded before interest-rate decisions from the European Central Bank and the Bank of England.
With the Federal Reserve signaling it may remove monetary stimulus, investors are seeking assurance from ECB President Mario Draghi that it has no plans to end its current accommodative stance, which is helping to sustain demand for higher-yielding assets including South African bonds. The Frankfurt-based ECB will keep its benchmark interest rate unchanged at a record low of 0.5 percent today, according to 61 of 62 forecasts in a Bloomberg News survey of economists.
“Event risk today comes from the ECB meeting which could generate some mild volatility,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “Expect mostly talk but it is possible they may hint at rate cuts or even a move towards giving formal guidance on the future trajectory of policy.”
South Africa’s currency gained 0.3 percent to 10.0583 per dollar as of 9:28 a.m. in Johannesburg. With U.S. markets closed for Independence Day, trading volumes may be low, Cairns said. Yields on benchmark 10.5 percent bonds due December 2026 rose one basis point, or 0.01 percentage point, to 7.97 percent.
The Standard & Poor’s GSCI Index (SPGSCI) of raw materials climbed as much as 1.7 percent, the most since June 20, as gold advanced for a second day. South Africa’s benchmark stock index rose for the first time in three days. Commodities account for more than 50 percent of South Africa’s exports, according to government data.
The ECB decision is scheduled for 1:45 p.m. in Frankfurt and Draghi will hold a press conference 45 minutes later. The Bank of England, at its first rate decision under new governor Mark Carney, will keep its bond-purchase target at 375 billion pounds ($573 billion) and maintain its key rate at 0.5 percent, separate Bloomberg surveys show. That decision is due at noon in London.
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