Rand Extends Worst Weekly Slide Since October on Marcus Outlook

The rand retreated, extending its worst weekly performance since October, after Reserve Bank Governor Gill Marcus said currency weakness remains an inflation risk and growth may slow.

South Africa’s currency depreciated 0.3 percent to 9.2149 per dollar as of 5:04 p.m. in Johannesburg, bringing its decline this week to 3 percent, the most since the five days ended Oct. 5.

The rand “does create challenges for monetary policy,” Marcus said in an address to German business executives in Johannesburg today. “It remains an upside risk to the inflation outlook” and will contribute to a breach of the bank’s 3 percent to 6 percent target range, she said.

South Africa’s inflation rate was unchanged in March at 5.9 percent. Rising prices have constrained policy makers from stimulating the economy, Marcus said last month. The nation’s growth outlook is “intricately” linked to Europe’s, and the downside risk to economic growth in advanced economies remains, she said today. The central bank held the repurchase rate at 5 percent in March.

Yields on benchmark 10.5 percent bonds due December 2026 dropped three basis points, or 0.03 percentage point, to 6.87 percent, the lowest on a closing basis since February 2006, according to data compiled by Bloomberg. The yield is down 17 basis points this week.

Policy Measures

Bonds rallied on optimism global central banks will extend measures to stimulate growth, supporting demand for riskier assets. Finance ministers and central bank chiefs are gathered in Washington to discuss policies to support economic growth. Tumbling commodity prices are reducing pressure on inflation, giving central banks more room to maneuver.

“With central banks committed to reflating their respective economies, the news of moderating inflation abroad means that the central banks will now have more room to keep monetary policy at extremely accommodative levels or even loosen further,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, said in e-mailed comments. “Inflows into bonds have improved recently and remain strong for the month of April.”

Foreign investors were net purchasers of 561 million rand ($62 million) of South African bonds yesterday, bringing purchases for the year to 26.4 billion, according to JSE Ltd. data. Offshore investors have bought a net 12.3 billion rand of the nation’s debt this month, compared with 6.4 billion rand in the corresponding period last year.

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