Bloomberg News

Rand Rises to 3-Week High Versus Dollar on U.S. Growth, Massmart

June 01, 2011

June 1 (Bloomberg) -- South Africa’s rand gained for a second day to a three-week high against the dollar after a report showed U.S. companies added fewer workers than forecast in May, adding to evidence the U.S. economy is cooling.

The rand advanced as much as 0.6 percent to 6.7736 per dollar, the strongest level since May 11. It traded 0.5 percent stronger at 6.7886 per dollar at 3:29 p.m. in Johannesburg, bringing its two-day rally against the U.S. currency to 2.3 percent, the best performance out of more than 20 emerging- market currencies monitored by Bloomberg. It traded at 9.7892 per euro, little changed from yesterday’s close.

The U.S. currency declined against 15 of its 16 most-traded peers after the private ADP Employers Services showed employment increased by the smallest number since September. The report fuelled speculation the Federal Reserve will keep its interest rate at a record low to bolster the economy.

“Growth variables out of the U.S. are slowing,” Tradition Analytics researchers led by Johannesburg-based Quinten Bertenshaw said in a research note before the U.S. data was released. “Against this backdrop the short-term outlook for the rand remains positive.”

Employment increased by 38,000 in May, from a revised 177,000 in April, according to figures from ADP Employer Services. The median estimate in the Bloomberg News survey called for a 175,000 advance for May.

The rand was also buoyed for a second day by the Competition Tribunal’s approval of Wal-Mart Stores Inc.’s 16.5 billion-rand ($2.4 billion) purchase of a controlling stake in Massmart Holdings Ltd., analysts said. South Africa’s currency had its biggest one-day jump in six months yesterday after the tribunal’s decision. Government and labor unions opposed the purchase, arguing it would harm local suppliers and rivals.

‘How Much Further’

“This morning we are left wondering how much further the Walmart/Massmart news can spur the market,” John Cairns and Nema Ramkhelawan, currency strategists at Rand Merchant Bank in Johannesburg, said in a research note. The decision “sends a signal that the country is still open for business” and “implies large flows into the rand,” with most flows to be absorbed by the central bank, they wrote.

Bonds advanced. The 6.75 percent securities due 2021 increased 82 cents to 90.27 rand, driving the yield 13 basis points, or 0.13 percentage point, higher to 8.21 percent, the lowest since January. The 13.5 percent notes due 2015 added 42 cents to 121.815 rand, trimming the yield by 11 basis points to 7.43 percent.

--Editors: Linda Shen, Ana Monteiro

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net.


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