The rand advanced for the first day in four on dollar weakness after the Swiss central bank said it is setting a minimum franc exchange against the euro. The rand gained as much as 1 percent to 7.0584 per dollar and traded 0.6 percent stronger at 7.0910 as of 10:37 a.m. in Johannesburg. The Swiss National Bank said it won’t let the franc fall below 1.20 per euro, and would defend the target with the “utmost determination.” The franc declined as much as 9.5 percent versus the euro after the announcement, while the 17- nation currency advanced as much as 1.2 percent against the dollar. The rand is strengthening “as a result of the dollar being pushed lower,” Ian Cruickshanks, head of treasury strategic research at Johannesburg-based Nedbank Capital, a unit of South Africa’s fourth-biggest bank, said by phone. The rand was also buoyed by foreign-investor purchases of the nation’s debt, which helped drive 10-year yields to the lowest level since 2008. Bond purchases by offshore investors have offset net equity outflows, helping to bolster the rand even as concern Europe’s debt crisis will worsen sapped demand for riskier, emerging-market assets. “The market is still being supported by offshore interest,” Brigid Taylor, head of institutional sales at Nedbank Capital, said by phone from Johannesburg. “We’re not seeing aggressive buying today, but there haven’t been massive risk-off outflows either. That’s why the rand is remaining stable.” Bond Yields Global funds have bought a net 53.8 billion rand ($7.6 billion) of South African bonds this year, even as they sold a net 7.53 billion rand of shares, according to JSE Ltd. data on Bloomberg. The extra yield investors receive for holding South African 10-year bonds rather than U.S. Treasuries dropped eight basis points, or 0.08 percentage point, to 5.52 percentage points today. The spread was 5.83 percentage points on Aug. 12, the widest this year. Bonds extended gains today as investors bet evidence of slowing global growth may persuade the central bank to cut its benchmark interest rate. The 6.75 percent securities due 2021 climbed 69 cents to 94.884 rand, driving the yield down 11 basis points to 7.508 percent, the lowest on a closing basis since December 2008. “Foreigners have held firm in their local long bond positions through the recent risk aversion,” Tradition Analytics strategists led by Johannesburg-based Quinten Bertenshaw wrote in a research note. “Local bonds are expected to remain firm.” Forward-rate agreements, which investors use to lock in borrowing costs, declined, with the contracts starting in March dropping three basis points to 5.11 percent, the lowest in at least 10 years, according to prices on Bloomberg. 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

Source