Cape Town - The rand gained for a second day on speculation that Janet Yellen, the nominee for chairman of the Federal Reserve, will maintain monetary stimulus that has fueled appetite for emerging-market bonds and stocks.
Yellen, 67, would succeed Ben S. Bernanke, whose term expires on January 31, putting the world’s most powerful central bank in the hands of a key architect of its unprecedented stimulus program.
Manufacturing production in South Africa slowed in August, a report tomorrow may show, limiting the central bank’s room to raise interest rates as inflation accelerates.
As vice-chairman of the Fed, Yellen “has been a big supporter of quantitative easing and is seen as a dove,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments.
“Risk assets will welcome her nomination as it signals a high likelihood of continued easy US monetary policy.”
The rand gained 0.4 percent to 9.9537 per dollar as of 9 a.m. in Johannesburg, the best performance out of 16 major currencies tracked by Bloomberg.
Yields on benchmark 10.5 percent bonds due December 2026 rose one basis points, or 0.01 percentage point, to 8.03 percent.
Yellen supported the Fed’s bond buying programs and was a driving force behind a strategy adopted in 2012 to commit the bank to goals on inflation and unemployment.
The Fed has said it will consider curbing its monthly bond purchases if the economy meets growth targets.
Minutes of its meeting last month, where Bernanke maintained the $85 billion monthly stimulus, will be released after the close of South African markets today.
Manufacturing growth in Africa’s biggest economy slowed to an annual 1.2 percent in August from 5.4 percent in July, according to the median estimate of 11 analysts in a Bloomberg survey.
The data will be released at 1 p.m. tomorrow. - Bloomberg News