Cape Town - South Africa’s rand gained for a second day after a US central bank official cautioned against excessive optimism about the economy, damping expectations the Federal Reserve will reduce stimulus that’s boosted appetite for emerging-market assets.
The Bloomberg US Dollar Index fell a second day after Federal Reserve Bank of St. Louis President James Bullard said yesterday policy makers should be careful in changing course based solely on economic forecasts.
US inflation probably fell to a monthly 0.2 percent in July from 0.5 percent in June, according to a Bloomberg survey of 82 economists.
South African retail sales rose at the slowest pace in eight months in June, according to a data released yesterday.
“Event risk today comes from the US,” where slowing inflation “would further question Fed tapering, and accelerate dollar weakness,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments.
“Further rand gains this morning are possible given ongoing dollar weakness.”
South Africa’s currency appreciated 0.7 percent to 9.9052 per dollar as of 10:26 a.m. in Johannesburg.
Yields on benchmark 10.5 percent bonds due December 2026 were little changed at 8.27 percent.
Fed officials are debating when to begin scaling back a third round of asset purchases as the US labor market heals and inflation remains below their 2 percent goal.
In September, Chairman Ben S. Bernanke will probably begin to reduce the central bank’s $85 billion in monthly bond purchases, according to 65 percent of economists surveyed by Bloomberg.
The US consumer price index probably rose an annual 2 percent in July from 1.8 percent in June.
Expansion in South African retail sales was an annual 1.9 percent in June from 6.2 percent a month earlier, Statistics South Africa said yesterday. - Bloomberg News