The rand’s drop in the past two weeks, the world’s steepest after Syria’s pound, is foiling prospects for an interest-rate cut.

Johannesburg - The rand’s drop in the past two weeks, the world’s steepest after Syria’s pound, is foiling prospects for an interest-rate cut by South Africa’s central bank amid mounting concern inflation will accelerate.

The rand has plunged 7.9 percent against the dollar since reaching a four-month high on May 3, surpassed only by the Syrian pound’s 29 percent drop in the period among more than 160 currencies tracked by Bloomberg.

Forward-rate agreements due as soon as three months rose 19 basis points this week to 5.07 percent, signaling the chances for a rate reduction this year are diminishing.

Similar contracts in Turkey have risen 6 basis points and were unchanged in Poland.

South African Reserve Bank Governor Gill Marcus is set to keep the benchmark repurchase rate at 5 percent today, according to all but one of 20 economists surveyed by Bloomberg, as the rand stymies efforts to spur an economy threatened again by mining strikes.

A government report yesterday showed consumer prices rose 5.9 percent in April, more than economists forecast, limiting Marcus’s room to follow policy makers from Australia to Turkey in lowering borrowing costs.

“The rand usually ends up being a potential game changer and this time is no different,” Carmen Nel, an economist with Rand Merchant Bank in Cape Town, said by phone yesterday.

The rand “changed the market’s perception quite rapidly on the possibility of a rate cut.”

Wage Talks

As recently as May 3, investors were predicting an 80 percent chance of a rate cut within 12 months, compared with less than 30 percent now. Marcus is due to announce the decision after 3 p.m. in Pretoria.

Wage negotiations in the mining industry have increased the risk of strikes, threatening the economic outlook after stoppages last year cut output by about 15 billion rand ($1.6 billion).

Credit default swaps, which increase when risk perception deteriorates, have risen 22 basis points in the past two weeks, while the yield on rand debt due in 2026 rose 35 basis points, or 0.35 percentage point, in the period.

The rand weakened 0.9 percent to 9.663 per dollar as of 8:47 a.m. in Johannesburg, extending its decline this year to 12 percent.

The inflation rate rises as much as 0.2 percentage point for every 1 percent fall in the rand, according to estimates from Johannesburg-based Standard Bank, Africa’s biggest lender.

Inflation Risks

“The balance of inflation risks has become more negative over the past week as the rand has weakened significantly and the annual wage round got off to a worrisome start,” Matthew Sharratt, an economist at Bank of America Merrill Lynch in Cape Town, said in a note to clients yesterday.

“Inflation expectations have yet to fully adjust to these negative developments, implying upside medium-term risks for inflation.”

Inflation was unchanged in April from the previous month, close to the top of the central bank’s target of 3 percent to 6 percent and above the 5.7 percent median estimate of 19 economists surveyed by Bloomberg.

The Monetary Policy Committee forecast in March the inflation rate will peak at an average 6.3 percent in the third quarter, before slowing to 5.2 percent in the final three months of 2014.

The yield gap between the fixed-rate bond due in 2017 and similar-maturity debt tied to inflation widened to 6.32 percentage points, the most in about a month, signaling investors are predicting average inflation will exceed the target over the period.

Growth Outlook

Marcus may be persuaded to overlook the rand’s effect on inflation, given the weak outlook for exports and a slump in consumer confidence, said Charles Robertson, global chief economist at Renaissance Capital in London.

He predicted a 25 basis point reduction today.

“The weaker rand will offer some benefit to the economy and an interest rate cut would offer some benefit to the economy,” Robertson said in a phone interview yesterday.

“This is an economy that needs both.”

The government is forecasting economic expansion of 2.7 percent this year, less than half the 7 percent annual growth that’s needed to reduce the jobless rate to 14 percent by 2020 from 25.2 percent currently.

The cost to protect South African dollar-denominated sovereign debt against non-payment for five years using credit default swaps climbed to 167 basis points yesterday since reaching a four-month low of 145 on May 10.

The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent if a borrower breaks debt agreements.

The rand’s depreciation will limit the room the Reserve Bank has to cut rates going forward, Stanislava Pravdova, an economist at Copenhagen-based Danske Bank A/S, said by phone yesterday.

“The domestic environment became a lot more negative,” she said.

“When the rand is under pressure there are expectations that inflation could also accelerate.” - Bloomberg News

The rand weakened for an 11th day, its longest losing streak in 25 years.

Johannesburg - The rand weakened for an 11th day, its longest losing streak in 25 years, after the Federal Reserve sparked speculation it will scale back stimulus measures as the world’s biggest economy recovers.

The worst-performing emerging-market currency this year traded at its weakest level against the dollar since March 2009 after Fed Chairman Ben Bernanke said yesterday a premature withdrawal of stimulus could endanger the US recovery as policy makers debated tapering the pace of its bond purchase program.

Reserve Bank Governor Gill Marcus will announce South African interest rates today, with 19 of 20 economists surveyed by Bloomberg expecting the rate to be held at a 30-year low.

“Bernanke’s comments to Congress have hit the markets badly,” John Cairns, a currency strategist at FirstRand’s Rand Merchant Bank in Johannesburg, said in a note to clients.

The rand, which has lost 12 percent this year, slipped 0.7 percent to 9.6406 per dollar by 10:00 a.m. in Johannesburg.

Yields on South Africa’s benchmark 10.5 percent rand bonds due December 2026 rose four basis points, or 0.04 percentage point, to 7.04 percent.

The MSCI Emerging Markets Index dropped 2 percent, poised for the biggest slide in 10 months.

The FTSE/JSE Africa All- Share Index dropped fell 1.4 percent. - Bloomberg News

South Africa's rand fell more than 1.2 percent to a fresh 4-year low against the US dollar.

Johannesburg - South Africa's rand fell more than 1.2 percent to a fresh 4-year low against the dollar on Thursday, largely tracking a retreat in high-yielding currencies after the US Federal Reserve signalled a scale-back of its stimulus drive.

The slide will stoke concerns about imported inflation pressures and all but shuts the door on a rate cut when the South African Reserve Bank concludes its third policy meeting of the year later in the day.

The rand hit 9.6980/dollar, the weakest it has been since March 31, 2009. It was the steepest faller against the greenback among 20 emerging market currencies tracked by Reuters.

By 08:44 SA time, the local unit had pulled back slightly to 9.67, still down 1 percent on the day.

“It's a reflection of Ben Bernanke's comments yesterday,” said John Cairns, a currency strategist at Rand Merchant Bank.

The Federal Reserve chairman said the bank could “in the next few meetings take a step down” in its bond purchases and warned that holding interest rates too low in the world's biggest economy had its risks.

“The dollar strengthened significantly and risky assets have come under a lot of pressure and the rand didn't fully reflect that in overnight trade,” Cairns said.

Near-zero interest rates in developed economies have spurred demand for high-yielding emerging market assets in recent months, although in South Africa's case this has been offset by investors' worries that violent strikes by mine workers could spread.

Government bonds came under selling pressure and yields were up in early trade as the market braced for a hawkish tone from the Reserve Bank, which is expected to hold the benchmark repo rate at 5 percent.

The yield for the benchmark 2026 paper jumped 10.5 basis points to 7.075 percent while the shorter-dated 2015 issue rose 4 basis points to 5.22 percent. - Reuters

South African stocks booked record closes as rand weakness helped investors return to oversold mining companies.

Johannesburg - South African stocks booked record closes on Wednesday as rand weakness helped investors return to oversold mining companies such as Impala Platinum.

The Top-40 index added 0.02 percent to 37,309.67 and the All-share was up 0.05 percent to 41,836.02.

They both touched lifetime records in earlier trade. - Reuters

Maize futures increased the most in more than a week on speculation the Crop Estimates Committee will predict a lower output.

Johannesburg - Corn futures in South Africa increased the most in more than a week on speculation the country’s Crop Estimates Committee will predict a lower output for this season when they release data tomorrow.

“A lower or smaller crop will lead to a smaller supply so prices will increase due to that,” Benjamin Swanepoel, a trader for Trademar Futures (Pty) Ltd., said in an e-mailed response to questions today.

White corn for delivery in July, the most active contract, gained 1.1 percent to 2,162 rand ($228) a metric ton, the most since May 14, by the close in Johannesburg.

The yellow variety for delivery in July rose 1 percent to 2,148 rand a ton.

Farmers are expected to produce 11.4 million tons of corn this year, according to a median estimate of six analysts surveyed by Bloomberg.

This compares with a forecast for 11.6 million tons made by the Pretoria-based Crop Estimates Committee on April 25.

South Africa produced 11.8 million tons last year, down from 2010’s 12.8 million tons, which was the biggest crop since 1982.

The nation is the continent’s largest producer of the grain.

Meal made from white corn is one of the country’s staple foods and the yellow variety is mainly used as animal feed.

Wheat for July delivery closed up 0.5 percent at 3,520 rand a ton. - Bloomberg News

South Africa is expected to slightly lower its 2013 maize output forecast, a Reuters survey showed.

Johannesburg - South Africa is expected to slightly lower its 2013 maize output forecast, a Reuters survey showed on Wednesday, due to dry weather this year that has hurt crop growth.

In its third production forecast last month, the South African government said the maize crop was expected to be at 11.562 million tonnes this year, down from 11.83 million tonnes in 2012.

An average forecast of six trading houses polled by Reuters now pegs the 2013 crop at 11.45 million tonnes. The estimates ranged between 11.3 million tonnes and 11.562 million tonnes.

“The drought in the Free State areas, mostly in the white maize areas, brought the average yield down,” a trader said.

South Africa's provinces of Free State and North West, which together produce more than half of the country's maize, were hit by the dry conditions.

Other traders expected the forecast to remain largely unchanged, saying the impact of the dry weather had already been taken into account in the previous estimates.

“At this specific time, the farmers are actually harvesting a bit more. They are getting better yields,” said another trader.

The government Crop Estimates Committee was due to release its fourth production forecast of this year's summer crops output on Thursday.

South Africa is the biggest maize producer on the continent and exports to its neighbours as well as to overseas markets such as Mexico, South Korea and Italy. - Reuters

South Africa's stocks opened at a fresh lifetime high as a weaker rand currency helped boost some exporters.

Johannesburg - South Africa's stocks opened at a fresh lifetime high on Wednesday as a weaker rand currency helped boost some exporters such as resource group Assore.

Exporters benefit from a depreciating rand, which lifts their profits when overseas earnings are brought home.

At 09:10 SA time, the Top-40 index of blue-chip stocks was up 0.28 percent at 37,408.16, while the All-Share index was up 0.26 percent at 41,925.84. - Reuters

The rand gained, snapping its longest losing streak in a year, after inflation outpaced economist estimates in April.

Cape Town - The rand gained, snapping its longest losing streak in a year, after inflation outpaced economist estimates in April, damping expectations of a central-bank interest rate cut this year.

The inflation rate was unchanged at 5.9 percent, Statistics South Africa said.

The median estimate in a Bloomberg survey of 19 economists was 5.7 percent.

The South African Reserve Bank’s Monetary Policy Committee, which tomorrow announces its latest interest-rate decision, targets inflation at 3 percent to 6 percent.

“Given the rand weakness already in place, this will, of course, add to the market’s nervousness over the extent of the eventual breach of the inflation target,” Razia Khan, the London-based head of Africa economic research at Standard Chartered Plc, said in an e-mailed note.

“The key at tomorrow’s MPC press conference is going to be the balance struck between concern about the breach of the inflation target and concern over the slowdown in the South African economy.”

South Africa’s currency gained 0.3 percent to 9.5175 per dollar by 10:49 a.m. in Johannesburg, ending nine days of losses, the longest streak since May 2009.

Bonds gained for the first time in nine days after the Bank of Japan pledged to maintain its stimulus program, fueling demand for higher-yielding assets.

Yields on benchmark 10.5 percent bonds due December 2026 dropped nine basis points, or 0.09 percentage point, to 6.96 percent.

Forward-rate agreements starting in December rose three basis points to 4.94 percent, the highest since April 26, as investors pared back rate-cut expectations.

The contracts are trading 19 basis points below the Johannesburg Interbank Agreed Rate, implying less than a 50 percent chance of a rate cut this year.

As recently as May 9, they were pricing in an 80 percent probability of a cut. - Bloomberg News

South Africa's rand lost further ground against the dollar, slumping for the ninth straight session.

Johannesburg - South Africa's rand lost further ground against the dollar on Tuesday, slumping for the ninth straight session, amid an escalation in labour unrest ahead of mid-year wage talks.

The rand was at 9.5490 to the dollar at 17:27 SA time, a drop of more than 1 percent from its close in New York on Monday.

It hit a fresh four-year low of 9.61 earlier and has now declined for a ninth straight session, its longest run of losing sessions since June 2008, when power utility Eskom had to impose rolling blackouts.

Government bonds were also under pressure, with the yield on the 2026 paper gaining 10 basis points to 7.05 percent, its highest in more than a month. The yield on the 2015 issue rose 7 basis points to 5.195 percent.

Ten striking miners at a chrome mine were injured after being hit by rubber bullets, police said on Tuesday, while industrial union NUMSA demanded a 20 percent pay hike for the automotive sector, raising fears of labour unrest in the manufacturing industry.

George Glynos, managing director at ETM Analytics, said the rand “could go anywhere now.”

“It is reflective of how fragile the South African economy is and you see this when sentiment turns sour very, very dramatically in the rand,” he said.

“This market is not moving on technicals, it is moving on fear. You just wait for the next bit of bad news and then it moves to the next leg.”

Finance Minister Pravin Gordhan told parliament that South Africa's economy would suffer if labour relations challenges were not resolved.

“We will see deteriorating confidence, job losses and business failures,” he said. - Reuters

South African stocks closed at record highs, undaunted by simmering labour tension in Africa's largest economy.

Johannesburg - South African stocks closed at record highs on Tuesday, undaunted by simmering labour tension in Africa's largest economy that caused the rand to plunge to a four-year low.

The weaker currency boosted mining firms who pay costs in rand and sell products in dollars with bourse heavyweights Anglo American and BHP Billiton adding the most points to the benchmark index.

But some traders said the buying frenzy lacked logic because of the turmoil in the mining industry - where labour strife has dented platinum and gold output for more than a year - ahead of wage negotiations in the next few weeks.

“There's a lot of negativity surrounding these mining companies. This type of buying is normally a precursor to a sell-off because there's no real strategy or fundamentals behind it,” said Bruno van Eck, a trader at Thebe Securities.

In the latest mine violence, 10 striking South African workers were taken to hospital on Tuesday after being hit by rubber bullets in a clash with security guards at a chrome operation owned by chemicals group Lanxess.

The benchmark JSE Top-40 index climbed 2.07 percent to close at a record high of 37,302.58.

The wider All-share index rose 1.79 percent to a lifetime high of 41,815.36.

Anglo American added 4.86 percent to 234.69 rand, making it the biggest percentage gainer on the benchmark index.

Rival BHP Billiton was up 3.68 percent at 286.76 rand.

Investors also picked up exporters such Mondi and Aspen Pharmacare as the rand weakened.

Mondi jumped 1.9 percent to 134.30 rand and generic drug maker Aspen Pharmacare was 1.49 percent higher at 216.62 rand.

On the downside, Growthpoint dropped 4.27 percent to 28.95 rand after the country's biggest real estate company said it would issue 2.5 billion rand ($261 million) in new shares.

An above average 263 million shares changed hands with advancers outnumbering decliners 181 to 119 while 59 stocks were unchanged. - Reuters