Rand Set for Second Weekly Gain After MPC Signals Rate Increase

The rand appreciated for a third day, headed for its second weekly advance, after South Africa’s central bank indicated it may raise borrowing costs as a weaker currency fuels inflation.

The Monetary Policy Committee left the repurchase rate at 5 percent yesterday, matching the forecasts of all 23 economists in a Bloomberg poll. While inflation slowed last month and the central bank lowered its price projections, MPC members spent “considerable time” discussing raising interest rates in the face of inflation threats, Governor Gill Marcus said.

“Governor Marcus iterated time and again in the statement about the continued risks to inflation along with a downward revision in growth, so on balance it was certainly more hawkish than we expected,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said by e-mail.

South Africa’s currency advanced 0.4 percent to 10.0894 per dollar as of 3:13 p.m. in Johannesburg, bringing its appreciation this week to 0.6 percent. Yields on benchmark bonds due December 2026 dropped six basis points, or 0.06 percentage point, to 8.19 percent, following a 12 basis-point jump yesterday.

Consumer inflation rate slowed to 5.5 percent in October, from 6 percent the previous month. That was lower than the 5.7 percent median estimate of 23 economists surveyed by Bloomberg.

Foreign investors sold a net 3.12 billion rand ($308 million) of South African bonds yesterday, the most in a day since May 29, according to JSE Ltd. data.

The rand maintained gains after a report showed business confidence in Germany, Europe’s largest economy, rose more than forecast. The euro area is South Africa’s biggest regional trading partner, accounting for 21 percent of exports in 2012, according to government data.

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