BLBG:Rand Climbs Second Day Against Euro on ECB, BoE Stimulus Signals
The rand strengthened against the euro and bond yields fell for a second day after European central bankers signaled their intention to maintain monetary stimulus that has helped boost demand for higher-yield assets.
Bank of England Governor Mark Carney and European Central Bank President Mario Draghi yesterday pledged to keep borrowing costs low, distancing themselves from Federal Reserve Chairman Ben S. Bernanke’s signal that the U.S. is preparing to reduce bond purchases as that economy strengthens.
“Risky assets have loved the aggressively dovish statements,” boosting the rand, John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “The commitment by the BoE and the ECB to keep rates at low levels for an extended period of time has helped the rand against the crosses” including the euro, he said.
South Africa’s currency appreciated 0.3 percent to 12.9181 per euro at 10:17 a.m. in Johannesburg, bringing the drop this week to 0.6 percent. It increased 0.2 percent against the dollar, paring its five-day decline to 1.4 percent. Yields on benchmark 10.5 percent bonds due December 2026 dropped four basis points, or 0.04 percentage point, to 7.89 percent.
The rand has declined 4.8 percent and yields have soared since May 22, when Bernanke said the Fed would taper monetary stimulus if the jobs market continues to improve. Employers probably increased staff in June at the same pace as in the prior month, data today will show, according to the median estimate of economists in a Bloomberg survey.
“While early-morning trade will be about adjusting to the BoE and ECB, afternoon trade will still be all about the U.S. non-farm payrolls figure,” Cairns said.
The rand stayed stronger after the South African Reserve Bank said gold and foreign-currency reserves dropped for a second month in June as the price of bullion fell and the central bank increased swap transactions.
Gross reserves dropped 2.4 percent to $47 billion, the Pretoria-based central bank said on its website today. That was lower than the $47.6 billion median estimate of five analysts surveyed by Bloomberg. Net reserves declined to $44.6 billion from $45.4 billion.
To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net
To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net
