BLBG:South Africa Rand Gains Second Day as Stocks, Commodities Rally on Greece
The rand gained against the dollar for a second day and bonds rose as Greece moved closer to a debt-swap agreement, whetting investors’ appetite for riskier assets including South Africa’s stocks and debt.
South Africa’s currency strengthened 1 percent to 7.5212 per dollar as of 1:13 p.m. in Johannesburg. The yield on the nation’s 77 billion rand ($10 billion) of 6.75 percent bonds due 2021 dropped six basis points, or 0.06 percentage point, to 7.81 percent, the lowest since Feb. 20. Bond risk declined for the first time in four days.
Investors with about 60 percent of eligible Greek bonds indicated they will participate in the world’s biggest sovereign debt restructuring. South Africa’s benchmark stock index gained for a second day as the prices of industrial metals including copper and nickel surged. The euro advanced against the dollar and yen as demand for refuge currencies waned.
“Today is a complete risk-on day; the euro is much stronger, and equity markets are doing relatively well,” Ion de Vleeschauwer, the Johannesburg-based chief dealer at Bidvest Bank Ltd., which runs South Africa’s largest chain of money changers, said by phone. “Everybody is now hoping that this Greek issue will be resolved.”
South Africa’s currency extended its advance after German industrial output rose more than economists’ forecasts in January, suggesting the euro-area’s largest economy is weathering the region’s debt crisis.
The rand could advance to “the lower-7.40s” per dollar if it breaches 7.50, a significant resistance level to further gains, De Vleeschauwer said. Resistance levels are price levels where traders cluster orders to sell a currency or security.
Euro Area
The euro area buys 22 percent of South Africa’s exports, according to government data for 2011. Raw materials account for 65 percent of South Africa’s exports. The nation has the world’s biggest mineral reserves, according to Citigroup Inc.
“Market fears have receded slightly,” John Cairns and Josina Solomons, currency strategists at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “The better environment is reflected in the rand. Our overall sense is that the latest market sell-off has run its course.”
Foreign investors bought a net 3.1 billion rand of South African stocks and bonds in the first three days of this week, up from 753 million rand last week, according to JSE Ltd., which runs the nation’s bond and stock exchanges.
The yield on South Africa’s $1.5 billion of 4.665 percent bonds due 2024 rose two basis points to 4.15 percent. The premium investors demand to hold the debt rather than U.S. Treasuries widened two basis points to 218 basis points.
Credit default swaps on South Africa’s foreign-currency sovereign bonds dropped 1.6 basis points to 163.8, according to CMA.
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
