Rand falls in run-up to manufacturing output data

The rand weakened for the first time in three days against the dollar on speculation that South African manufacturing growth slowed, prompting traders to curb bets of interest-rate increases.

Manufacturing growth slowed to 1.2% in August from 5.4% the previous month, a report may show in Thursday, according to the median estimate of 11 economists in a Bloomberg survey. Mining output rose 0.8% from 0.6%, a separate report may show.

South Africa’s central bank has left its benchmark repurchase rate at 5% since July 2012 to support growth even as inflation rose above target.

"The impact of these numbers on the rand should be judged via their perceived consequences for the balance of payments and monetary policy," Bruce Donald, a currency strategist at Standard Bank Group in Johannesburg, and colleagues said. "We expect outcomes will be consistent with a bank that is disinclined towards hiking rates, notwithstanding a breach of the inflation target ceiling and risks to inflation posed by currency vulnerability, owing to weak economic growth."

The rand depreciated 0.3% to 9.9880 per dollar as of 10.08am in Johannesburg on Thursday. Yields on benchmark 10.5% bonds due December 2026 fell less than one basis points to 8.1%.

The dollar climbed against all of its most-traded peers except for three currencies on signs of a compromise among US lawmakers that would avert an unprecedented debt default amid a continuing partial shutdown of the government in the world’s biggest economy. The rand has retreated 15% this year against the dollar, the most among the major currencies. – Bloomberg

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