The rand rebounded yesterday as a halt in momentum in US manufacturing cast doubt on the Federal Reserve’s plan to curb monetary stimulus.
South African bonds advanced for a second day.
US factory orders may have contracted in December, adding to evidence of a manufacturing slowdown in that economy. An official gauge of factory output shrank last month by the most since December 1980, a report showed yesterday.
The Fed has cut monthly bond purchases by $20 billion (R223bn), while saying tapering would depend on a sustained economic recovery.
The prospect of reduced asset buying prompted a sell-off in developing markets, including South Africa.
“Those US factory orders were quite negative and suggested that they might pause tapering,” Traditional Financial Services currency trader Danny Pienaar said.
“That has taken a slight edge off the rand.”
At 5pm yesterday the rand was bid at R11.13 to the dollar, an advance of 6.58c from the same time on Monday.
The yield on the benchmark R186 bond, due in December 2026, dropped 15 basis points to 8.77 percent.
The rand’s gain reversed a slump the previous evening after Reserve Bank governor Gill Marcus said further rate increases were not “automatic”. The rand’s fall after Marcus’s comments was “overdone”, Pienaar said. – Bloomberg