Rand slips on reserves data, awaits Mboweni

JOHANNESBURG – South Africa’s rand weakened yesterday morning after reserves data showed that the central bank had speeded up the pace of its dollar buying in September, with jitters also mounting ahead of its monetary policy meeting next week.

At 0650 GMT the rand was trading at 6,5750 against the dollar, compared with 6,52/dollar just ahead of the figures. But traders said they were a bit baffled by the reaction, which analysts saw as overdone.”People are nervous about being short of dollars ahead of next week’s MPC (monetary policy committee) meeting,” a local trader said.”I think it could go to 6,65/dollar ahead of the event.”A Reuters poll of 24 economists this week showed that opinion is almost evenly split on whether the Reserve Bank will trim its key repo rate again at its October 13-14 policy meeting, after slashing it unexpectedly in August.Another cut in the repo rate – which stands at 7,50 per cent – would further erode the yield appeal of the rand to foreign investors, particularly as US interest rates continue to rise.The central bank said its net reserves rose to US$9,034 billion at the end of September from US$8,551 billion the previous month — a bigger jump than the previous month, when reserves rose by US$175 million.But the September data was affected by the repayment of a foreign loan by the National Treasury in October, which boosted its forward book by US$156 million.This means that the value of cash reserves rose by US$310 million during the month.”The numbers show that the SARB did purchase dollars at a slightly more aggressive pace in September than in August, but this is not surprising given the underlying strength of the rand during the month,” JP Morgan analyst Marisa Fassler said.The rand has been supported by a September announcement from Britain’s Barclays that it wants to purchase a majority stake in Absa, which would lead to a large inflow of foreign currency, as the bank is valued at around US$6 billion.Markets will turn their attention to comments from central bank governor Tito Mboweni in a speech in Cape Town last week, and his testimony to parliament for clues to the outcome of next week’s MPC meeting.Yields on the short-dated R194 bond due 2008 were up three basis points at 8,58 per cent compared with the previous day, but unmoved on the data.Yields on the benchmark R153 were also up by three basis points at 8,90 per cent.- Nampa-ReutersBut traders said they were a bit baffled by the reaction, which analysts saw as overdone.”People are nervous about being short of dollars ahead of next week’s MPC (monetary policy committee) meeting,” a local trader said.”I think it could go to 6,65/dollar ahead of the event.”A Reuters poll of 24 economists this week showed that opinion is almost evenly split on whether the Reserve Bank will trim its key repo rate again at its October 13-14 policy meeting, after slashing it unexpectedly in August.Another cut in the repo rate – which stands at 7,50 per cent – would further erode the yield appeal of the rand to foreign investors, particularly as US interest rates continue to rise.The central bank said its net reserves rose to US$9,034 billion at the end of September from US$8,551 billion the previous month — a bigger jump than the previous month, when reserves rose by US$175 million.But the September data was affected by the repayment of a foreign loan by the National Treasury in October, which boosted its forward book by US$156 million.This means that the value of cash reserves rose by US$310 million during the month.”The numbers show that the SARB did purchase dollars at a slightly more aggressive pace in September than in August, but this is not surprising given the underlying strength of the rand during the month,” JP Morgan analyst Marisa Fassler said.The rand has been supported by a September announcement from Britain’s Barclays that it wants to purchase a majority stake in Absa, which would lead to a large inflow of foreign currency, as the bank is valued at around US$6 billion.Markets will turn their attention to comments from central bank governor Tito Mboweni in a speech in Cape Town last week, and his testimony to parliament for clues to the outcome of next week’s MPC meeting.Yields on the short-dated R194 bond due 2008 were up three basis points at 8,58 per cent compared with the previous day, but unmoved on the data.Yields on the benchmark R153 were also up by three basis points at 8,90 per cent.- Nampa-Reuters