Cape Town - South Africa’s rand gained for a second day and bond yields fell to the lowest in more than two months on speculation the Federal Reserve will maintain monetary stimulus as a US government shutdown slows growth.
The dollar weakened against all but one of 16 major counterparts as lawmakers failed to agree on a spending plan for the new fiscal year.
The dead-lock threatens to hurt the economy just as the central bank weighs tapering bond purchases that have fueled demand for higher-yielding assets including emerging-market debt.
South Africa’s Purchasing Managers’ Index stayed above the 50 level that indicates expansion for the sixth month in September, a report may show today.
“What is important to watch is the length of this shutdown and its potential impact on US economic growth,” Societe Generale SA strategists led by London-based Benoit Anne said in a note to clients.
“To the extent that it may affect Fed policy expectations, this may actually feed through as a risk-on signal for global emerging-market assets.”
The rand appreciated 0.5 percent to 9.974 per dollar as of 9:56 a.m. in Johannesburg.
Yields on benchmark 10.5 percent bonds due December 2026 dropped eight basis points, or 0.08 percentage point, to 7.89 percent, the lowest on a closing basis since July 22.
The US government began its first partial shutdown in 17 years, idling as many as 800,000 employees.
The Fed said in May it may pare monetary stimulus if the economic recovery remains on target.
Foreign investors bought 14.1 billion rand ($1.4 billion) of South African bonds in September, the most in a month this year, according to JSE Ltd. data.
The country’s PMI fell to 54 in September, from 56.5 the month before, according to the median estimate of seven economists in a Bloomberg survey.
Automobile sales probably rose 0.2 percent last month, compared with a 0.3 percent decline in August, a separate report may show. - Bloomberg News