Rand declines as bonds drop

Cape Town - South Africa’s rand declined and bonds fell after a gauge of Chinese manufacturing dropped and the Federal Reserve signaled stimulus that fuelled demand for the nation’s debt may be reduced in coming months.

A private index of output in the biggest buyer of South African raw materials decreased for the first time in four months, adding headwinds to a recovery in the world’s second-largest economy.

Minutes of the Fed’s last meeting signaled asset purchases may be cut as the economy improves.

South Africa’s central bank will leave its policy rate unchanged today, according to all 22 economists in a Bloomberg survey.

“Early tapering now seems possible again,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments.

That prospect is “enough to generate some meaningful” rand weakness today, he said.

Chinese data is adding to the “negative tone,” Cairns said.

The rand slipped as much as 0.4 percent and traded 0.2 percent weaker at 10.1676 per dollar as of 10:08 a.m. in Johannesburg.

Yields on bonds due December 2026 climbed four basis points, or 0.04 percentage point, to 8.17 percent.

Foreign investors sold a net 727 million rand ($72 million) of South African bonds yesterday, bringing outflows this month to 7.67 billion rand, according to JSE Ltd. data.

The preliminary 50.4 reading in November for China’s Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics, known as the flash PMI, compared with a 50.8 median estimate of analysts surveyed by Bloomberg.

China accounted for 12 percent of South Africa’s exports in 2012, according to National Treasury data. - Bloomberg News