BLBG: Rand Gains for 1st Day in 4 as Minister Gordhan Says Strong Rand ‘Helpful’
The rand strengthened for the first time in four days against the dollar after Finance Minister Pravin Gordhan said South Africa’s government won’t intervene to stem gains.
The currency of Africa’s biggest economy advanced as much as 0.3 percent to 6.6449 per dollar and traded 0.2 percent stronger at 6.6523 as of 11:03 a.m. in Johannesburg. It declined 0.1 percent to 9.906 per euro.
The rand’s strength was helping contain fuel and food price increases, and the benefits of the strong currency need to be weighed against the negative effect the currency is having on some manufacturers, Gordhan said in Cape Town yesterday. The Reserve Bank added $1.85 billion to its foreign-exchange reserves in March, more than the $1.49 billion bought in February, it said on its website on April 7. Foreign-exchange data for April is due on May 9.
“It is a short-term positive for the rand,” George Glynos, managing director of Econometrix Treasury Management, said by phone from Johannesburg. “We can see from the monthly reserves data that the Reserve Bank stepped back from the market a bit in March, and we haven’t heard any anecdotal evidence of increased activity in April.”
The rand has climbed 8.8 percent against the dollar in the past three months as the U.S. pledged to hold interest rates near zero, prompting investors to seek higher-yielding assets. South Africa’s benchmark interest rate is 5.5 percent. The rand may extend gains if the Federal Reserve maintains its monetary stimulus, Glynos said.
“Economies that are trying to normalize their monetary policies are doing better than those who do not,” he said. “Given the conservative nature of South Africa’s economic policies, the rand may strengthen further through 2012.”
South Africa’s benchmark 10-year bonds declined for a second day. The 6.75 percent securities due 2021 dropped 5 cents to 88.41 rand, pushing the yield up one basis point, or 0.01 percentage point, to 8.51 percent.
To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net
To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net.
