BLBG:Rand Strengthens to Week-High as Commodities Rally on Growth, Europe Debt
The rand climbed to its strongest level against the dollar in more than a week amid signs the global economy is recovering and as Europe’s leaders inched toward a revamped strategy to contain the region’s debt crisis.
South Africa’s currency appreciated for a second day, adding as much as 1.7 percent to 7.9007 per dollar and trading 0.3 percent up at 8.0200 as of 10:36 a.m. in Johannesburg. Against the euro, it gained 0.5 percent to 11.1264.
Reports showed China’s manufacturing may grow in October for the first time in four months and Japanese exports increased more than expected in September. European leaders outlined plans to aid banks and ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund yesterday in their 13th crisis-management summit in 21 months. Copper surged more than 4 percent and gold, which with platinum accounts for about a fifth of South Africa’s export earnings, advanced for a second day. The nation’s benchmark stock index climbed to its highest in almost three months.
“Equity markets are up and growth-sensitive commodity prices have increased,” John Cairns and Nema Ramkhelawan-Bhana, currency strategists at Rand Merchant Bank in Johannesburg, said in a research note. “This positive sentiment towards risky assets should provide some support to the rand.”
Bonds Retreat
South African bonds declined before Finance Minister Pravin Gordhan’s mid-term budget speech tomorrow, with the yield on 13.5 percent notes due 2015 climbing two basis point, or 0.02 percentage point, to 6.727 percent.
Gordhan may increase his forecast for the fiscal gap to 5.4 percent of gross domestic product in the year beginning April 1 from 4.8 percent estimated in his February budget, according to the median estimate of seven economists surveyed by Bloomberg.
A wider budget gap will require more borrowing, raising the supply of bonds in the market and pushing yields higher even as economic growth slows, the RMB analysts wrote.
“The supply-demand balance will trump low growth and inflation,” they wrote. “The bias tomorrow seems to be bond- bearish.”
To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
