Rand Trims First Monthly Advance Since October on Fed Rate Bets

The rand pared its first monthly advance against the dollar since October as the Federal Reserve left open the prospect of higher borrowing costs.

The currency of Africa’s most industrialized economy weakened 1.2 percent to 11.9333 per dollar as of 6:01 p.m. in Johannesburg, trimming its advance in April to 1.5 percent and ending five months of losses.

The Fed on Wednesday repeated its view that U.S. growth will rebound to a “moderate pace,” damping speculation it may delay its first rate increase since 2006 until next year and reducing the appeal of riskier assets like those in South Africa’s rand. Of the 24 emerging-market currencies tracked by Bloomberg, 17 have strengthened against the greenback this month.

“The rand has been quite sensitive to the dollar,” Mike Keenan, a strategist at Barclays Africa Group Ltd. in Johannesburg, said by phone. “The fact that dollar strength has run out of steam has provided quite a bit of support of the currency.”

Against the euro, South Africa’s currency fell 1.6 percent to 13.3, the biggest drop since Jan. 27. The 19-nation shared currency rallied to its highest level against the dollar in two months on signs Europe’s economy is improving as the U.S. slows.

Yields on South African benchmark bonds due December 2026 climbed two basis points to 7.96 percent on Thursday, compared with 7.80 percent at the end of March.

The dollar will probably rebound from this month’s decline, Bernd Berg, director of emerging-markets strategy at Societe Generale SA in London, said by e-mail.

“Our economists expect that U.S. data will surprise on the upside over the coming weeks, proving that the U.S. economy will rebound from its temporary weakness over the last months,” he said. Investors will next focus on payrolls data out of the U.S. on May 8, which will give further clues on the timing of monetary tightening by the Fed.

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