BLBG:Rand Gains Most Among Major Currencies on Europe Debt Pledge, U.S. Growth
The rand led major-currency gains against the dollar as a new pledge to stem Europe’s debt crisis and signs of a recovery in the U.S. economy spurred demand for riskier assets.
The South African currency strengthened as much as 2.1 percent to 7.8344 per dollar, its strongest level since Sept. 29. The rand traded 1.9 percent higher at 7.8463 as of 10:47 a.m. in Johannesburg, the biggest increase among 16 major currencies monitored by Bloomberg. Against the euro, the rand gained 0.3 percent to 10.6579.
German Chancellor Angela Merkel and French President Nicolas Sarkozy will deliver a plan to recapitalize European banks and address the Greek debt crisis by the Nov. 3 Group of 20 summit. Goldman Sachs Group Inc. and Macroeconomic Advisers LLC raised their U.S. growth forecasts in the third quarter, after an Oct. 7 report showing a 103,000 advance in payrolls. The Standard & Poor’s GSCI index of raw materials and South Africa’s benchmark stock index advanced for a fourth day.
“The pendulum seems to have swung back in favor of improved sentiment,” Tradition Analytics strategists led by Johannesburg-based Quinten Bertenshaw wrote in e-mailed comments. “A steady rotation away from safe-haven assets should see risk assets benefit.”
Foreign investors were net buyers of 1.65 billion rand ($210 million) of South African stocks and bonds last week, after selling 4.79 billion of securities the week before, according to JSE Ltd. data.
The rand may advance to 7.73 per dollar after breaching 7.90, the Tradition analysts wrote.
Bonds Rally
Bonds gained for a fifth day on speculation the stronger rand will reduce inflationary pressures, giving the central bank more room to cut interest rates. The yield on the 6.75 percent securities due 2021 dropped six basis points, or 0.06 percentage point, to 8.06 percent, the lowest since Sept. 16.
“Any firm recovery in the rand would dilute any expectation of a strong rise in inflation and trigger a rethink on the outlook for rates,” Tradition wrote. “Interest rates, inflation and growth could remain a lot softer than the market has priced in,” spurring demand for longer-term debt, they added.
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
