Rand weakens amid bond selloff

Published Dec 4, 2013

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Cape Town - The rand declined for a third day amid the longest selloff of South African bonds in five years on concern that the nation will struggle to finance its current- account gap when Federal Reserve stimulus dries up.

The current-account shortfall widened to 6.8 percent of gross domestic product in the third quarter, the central bank said.

Foreign investors dumped South African bonds for a 10th straight day yesterday, the longest streak since October 2008, according to data compiled by Bloomberg from the Johannesburg Stock Exchange.

Bond outflows since the beginning of November climbed to 16.6 billion rand ($1.6 billion).

“The balance of payments position remains vulnerable, maintaining pressure on the rand,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said in an e-mailed note.

“”The rand managed to capitulate in the usual fashion” following yesterday’s data, he said.

The rand weakened 0.6 percent to 10.3885 per dollar by 2:31 p.m. in Johannesburg.

Yields on bonds due December 2026 climbed five basis points, or 0.05 percentage point, to 8.44 percent.

The Fed will probably pare the monthly pace of bond buying to $70 billion from $85 billion at their March 18-19 meeting, according to the median of 32 estimates in Bloomberg’s most recent survey of economists conducted on November 8.

ADP Research Institute will say today companies in the US added 170,000 positions in November, which would be the most in five months, according to a Bloomberg survey.

In a separate report today, the Institute for Supply Management’s non-manufacturing index may indicate continued expansion in industries that make up almost 90 percent of the world’s biggest economy. - Bloomberg News

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