The rand declined for the first time in five days after South African Reserve Bank Governor Gill Marcus said economic growth is likely to remain low. Bond prices dropped for the first time in three days.
The currency of Africa’s biggest economy depreciated 0.4 percent to 8.8677 per dollar at 4:08 p.m. in Johannesburg. Yields on benchmark 10.5 percent rand bonds due December 2026 rose two basis points to 7.58 percent.
Fourth-quarter growth is “likely to be very low,” Marcus told delegates of the National Union of Metalworkers of South Africa in Johannesburg today. The central bank has room to cut borrowing costs, though it would be inappropriate to adjust rates at the moment, she said. The economy expanded 1.2 percent in the third quarter from the previous three months, Statistics South Africa said yesterday, missing the 1.5 percent median estimate of 17 economists polled by Bloomberg.
“You can see she’s clearly worried about the fiscal side of things, bearing in mind she can only control the monetary side,” Warrick Butler, head of rand trading at Johannesburg- based Standard Bank Group Ltd., said by telephone. “It’s also month-end so there’s decent demand from the oil companies and other importers that’s keeping the rand under pressure.”
The rand also retreated after U.S. Senate Majority Leader Harry Reid said he was disappointed with the progress made in congressional budget talks over $607 billion in tax increases and spending cuts set to begin in January.
“Continued fears over the fiscal cliff have more than offset any positives from the Greek news or from continued good U.S. data,” John Cairns and Josina Solomons, strategists at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “Commodity prices are searching for direction amid heightened worries over the U.S. fiscal cliff and renewed fears about the global economic outlook.”
The 34-member Organization for Economic Cooperation and Development countries combined will grow 1.4 percent this year and next, less than the 1.6 percent and 2.2 percent predicted in June, according to the OECD’s semi-annual Economic Outlook. Euro-area finance chiefs agreed to a deal for Greek aid yesterday.
Standard & Poor’s GSCI index of commodities fell as much as 1.3 percent, a third day of declines. Commodities accounted for 45 percent of South Africa’s exports last year, according to government data.
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