Rand Rises to Six-Week High Amid Speculation Rate Will Be HeldRobert Brand
The rand advanced to the strongest level in six weeks and bonds gained amid speculation that the South African Reserve Bank will leave borrowing costs at a three-decade low this week to bolster growth.
The Monetary Policy Committee will leave its benchmark repo rate at 5 percent on July 18, according to all 18 economists in a Bloomberg survey. The central bank left the repo rate unchanged after a 50 basis-point cut a year ago. Federal Chairman Ben S. Bernanke may provide more clarity on the outlook for monetary stimulus in the world’s biggest economy when he addresses the U.S. Congress this week.
“The rand has remained fairly stable around 10 against the dollar, inflation has, on balance, surprised to the downside year-to-date and real activity indicators remain weak,” Carmen Nel, a Cape Town-based analyst at Rand Merchant Bank, said in e-mailed comments. “As such, we think it highly unlikely that the Reserve Bank will change its stance.”
South Africa’s currency appreciated as much as 1 percent to 9.7742 per dollar, the strongest level since June 4. It traded 0.5 percent higher at 9.8235 as of 3:53 p.m. in Johannesburg. Yields on benchmark 10.5 percent bonds due December 2026 dropped eight basis points, or 0.08 percentage point, to 7.86 percent, the lowest since July 2.
Bernanke, in two days of testimony to Congress starting tomorrow, may shed more light on the central bank’s view of the economy and how policy makers may begin scaling back $85 billion in monthly bond purchases that have helped fuel demand for high-yielding assets including South African debt.
“The market is waiting for Bernanke tomorrow,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, and colleagues said in a note. “The Fed is expected to maintain low interest rates and continue with its stimulus program for the rest of 2013.”
Foreign investors bought a net 284 million rand ($29 million) of South African bonds yesterday following net inflows of 531 million rand last week, according to JSE Ltd. data.