South African assets recover as investors eye Federal Reserve
JOHANNESBURG (Reuters) - South Africa's rand and bonds rallied on Friday as soft economic growth data in the United States ahead of a speech by the Federal Reserve chair upped bets the bank could delay hiking lending rates. By 1420 GMT the rand had gained 1.6 percent to 13.9900 per dollar, versus its close of 14.2220 on Thursday, after sluggish U.S. second quarter GDP data hobbled the greenback and lifted emerging currencies.. After gaining around 10 percent against the greenback over the past two months, the rand fell 4 percent this week in response to news that Finance Minister Pravin Gordhan was summoned by police over an investigation into a surveillance unit set up at the tax department when he was in charge. The probe is seen by many analysts and the opposition as a politically-driven attack on Gordhan. The police unit carrying out the investigation has denied the claims. "This has stoked concerns regarding governance in the country," said Africa analyst at Capital Economics Johan Ashbourne in a note. Bonds tracked the currency firmer, with the yield on the benchmark paper due in 2026 cutting 12 basis points to 8.94 percent. The stock market was flat, with the benchmark Top-40 index rising 0.1 percent to 46,807 points, while the All-Share index up 0.04 percent to 53,507. points. Investors were wary of U.S. Fed chair Janet Yellen hinting at a near-term interest rate hike, which could divert some of the liquidity that has underpinned riskier assets worldwide, though others predicted she would strike a more equivocal note. "Everybody is just basically waiting to see if she's going to have a hawkish or dovish tone. The market is really just staying put until she gives some kind of direction," BP Bernstein trader Vasili Tirasis said. The banking index, which fell sharply on the news of Gordhan's probe, rose 0.50 percent, while the gold index added 0.22 percent, tracking higher bullion prices. Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. (Reporting by Mfuneko Toyana and Nqobile Dludla; Editing by James Macharia)
