SF: Rand Strengthens After Reports Show Economic Recovery Intact
Aug. 4 (Bloomberg) -- The rand strengthened, reversing earlier declines, after reports showed U.S. service industries and employment grew more than estimated last month, easing concern the world's biggest economy is slowing.
The currency appreciated 0.2 percent to 7.2732 by 5:06 p.m. in Johannesburg, from a previous close of 7.2852. Against the euro the rand gained 0.8 percent to 9.5563.
U.S. service industries in July expanded at a faster rate than forecast, with the Institute for Supply Management's index of non-manufacturing businesses, which covers about 90 percent of the economy, climbing to 54.3 from 53.8 in June. Economists had forecast the index would fall to 53, according to the median of 77 projections in a Bloomberg News survey.
"Currency and equity markets are moving in response to data on a day-to-day basis and today it was better than expected," said Nigel Rendell, an emerging-market strategist at RBC Capital in London. "That's a factor of the uncertain times we live in -- there's still no clear picture of how the economic outlook will play out."
South Africa's currency slid as much as 0.6 percent to as weak as 7.3271 per dollar earlier today as concern the U.S. economy may slow spurred investor demand for safer assets, boosting purchases of Japanese yen and Treasuries.
A separate report today showed U.S. companies added more workers in July than forecast. Payrolls excluding government agencies climbed by 42,000 workers last month after a 19,000 increase the prior month, according to figures from ADP Employer Services. Economists surveyed by Bloomberg News had forecast a gain of 30,000, according to the median estimate.
Government bonds fell for a third day in South Africa, with the benchmark 13.5 percent security due September 2015 dropping 10 cents to 124.29 rand. The yield on the bond rose 1 basis point to 7.64 percent.
Money-market investors added to bets that South Africa's central bank will reduce its main interest rate at its next meeting on Sept. 9, forward-rate agreements show. The cost of three-month contracts for cash in three months was little changed from its previous close at 6.235 percent.
