Sept. 29 (Bloomberg) -- The rand weakened for the first day in five against the dollar, heading for its worst quarter in more than three years after credit growth and money-supply data fueled bets of a central bank rate cut in coming months.
South Africa’s currency dropped 0.6 percent to 7.8553 as of 4:06 p.m. in Johannesburg, bringing its decline this quarter to 14 percent, the most since the first three months of 2008. Against the euro, the rand sank 0.8 percent to 10.7125, for a three-month retreat of 8.4 percent.
Credit growth accelerated to 6.1 percent in August, from 5.7 percent in July, the Pretoria-based Reserve Bank said today. That’s still not enough to signal a recovery in consumer demand, BNP Paribas SA analysts led by London-based Bartosz Pawlowksi said in an e-mailed comment. The central bank will “act appropriately” to counter an economic slowdown, Governor Gill Marcus said on Sept. 22.
“Money-supply data showed continued acceleration but in our view it is still not enough to spark inflationary pressures,” the BNP analysts wrote. “The overall effect is likely to be an increase of the rate-cut expectations” and “a renewed weakening” of the rand.
Producer inflation quickened 9.6 percent in August, the fastest pace since December 2008, from 8.9 percent the previous month, Statistics South Africa reported. Even so, the central bank probably won’t raise its rate, Tshepo Mosepele, an analyst at Standard Bank Group Ltd. in Johannesburg, said by e-mail.
“We maintain that the repo will remain on hold this year,” Mosepele said. “However, there is the risk of further rate cuts, particularly if the growth outlook here and abroad deteriorates further.”
The rand stayed weaker after German lawmakers voted in favor of expanding a bail-out fund for debt-stricken euro-region nations, and as reports showed the U.S. economy grew faster than estimated and jobless claims fell last week.
“Participants remain concerned about the EU debt situation and the global growth outlook,” Standard Bank analysts led by Johannesburg-based Michael Keenan wrote in a research note. “Risky assets remain under pressure.”
The rand may target 8.19 per dollar in the “short term,” the Standard Bank analysts wrote. The likelihood of the rand trading at 8.19 per dollar within the next month is 60 percent, according to calculations based on options prices monitored by Bloomberg.
Bonds declined for a second day after yields fell to the lowest in a week on Sept. 27. The 6.75 percent securities due 2021 dropped 24 cents to 90.59 rand, pushing the yield up four basis points, or 0.04 percentage point, to 8.196 percent.
“Offshore investors still seem to be selling into any local bond strength,” Rand Merchant Bank analysts led by Theuns de Wet wrote in a research note. “The rally in bonds might struggle from these levels.”
Foreign investors were net sellers of 4.9 billion rand ($623 million) of South African bonds in the first three days of the week, according to JSE Ltd. data. Before this week, foreign investors had purchased a net 41.5 billion rand of South African debt this year, driving the yield on 10-year notes to a four- year low on Sept. 8.
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