BLBG:Rand Gains First Day in Five to Dollar as Equities, Commodity Prices Rally
The rand appreciated for the first day in five against the dollar as stocks and metal prices rose, damping demand for the U.S. currency as a haven. Bonds declined, snapping a four-day rally.
The rand strengthened as much as 1.6 percent to 7.0718 per dollar, its biggest increase this month. South Africa’s currency traded 1.3 percent stronger at 7.0951 as of 10:19 a.m. in Johannesburg. It climbed 0.7 percent to 9.9898 per euro.
Emerging-market stocks rose for the first time in four days and prices of industrial metals including copper, nickel and aluminum advanced after the Swiss central bank yesterday said it will defend a ceiling for the franc, and the U.S. services industry expanded more than expectations in August. South Africa’s benchmark stock index snapped a three-day decline, led by BHP Billiton Ltd., the world’s biggest mining company, and Cie. Financiere Richemont SA, the second-biggest luxury-goods company, whose five-month sales beat analysts’ estimates today.
“The tide of the recent bearish growth trade seems to be turning,” Tradition Analytics strategists led by Johannesburg- based Quinten Bertenshaw wrote in a research note. “All the monetary inflation that is going on globally will, ultimately, begin to boost stocks and commodity prices” and be “a net supportive factor for the rand.”.
South Africa’s currency will likely trade between 7.10 and 7.20 per dollar today, Tradition said, advising clients buy rand above 7.15 per dollar.
Reserves Data
The rand extended gains after the central bank reported its foreign-currency and gold reserves advanced 2.7 percent in August. Gross gold and foreign-currency reserves rose to $51.45 billion from $50.11 billion in July, the Pretoria-based Reserve Bank said on its website. The median estimate of eight economists surveyed by Bloomberg was for gross reserves to climbed to $50.9 billion.
The increase was “primarily due to a higher U.S. dollar gold price and the depreciation of the U.S. dollar against other major currencies,” the central bank said, indicating it didn’t boost its currency purchases in the market last month, when the rand weakened 4.1 percent versus the dollar.
South Africa’s currency maintained its advance after the German Constitutional Court rejected challenges to Germany’s participation in euro-region financial rescue packages.
Bonds declined for the first time in five days, snapping a rally that drove four-year borrowing costs to 6.346 percent, the lowest on record. The yield has plunged 109 basis points since July 1 as investors bet the central bank will cut its key interest rate as global growth slows.
The 13.5 percent notes due 2015 dropped 29 cents to 124.73 rand, driving the yield up six basis points, or 0.06 percentage point, to 6.407 percent. The yield may rise as high as 7.10 percent in coming weeks, Tradition said.
“The market has gotten particularly one-sided on the long local bond trade and as a result, in our view, a correction is needed,” Tradition wrote. The central bank “will be unlikely to cut before inflation begins to come off.”
To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
