June 2 (Bloomberg) -- The rand climbed to a three-week high against the dollar as U.S. reports signaled a weakening economy and German Chancellor Angela Merkel shored up confidence in the euro, the currency of South Africa’s main trading partner. Bonds rallied, sending yields to five-month lows.
The rand advanced as much as 1 percent to 6.7413 per dollar, and traded 0.9 percent stronger at 6.7492 by 4:53 p.m. in Johannesburg, the second-biggest gain out of more than 20 emerging-market currencies monitored by Bloomberg after Turkey’s lira. It added 0.3 percent to 9.7648 per euro.
Reports showing higher-than-forecast U.S. jobless claims and the biggest decline in factory orders in almost a year dragged the dollar lower against its major trading peers. The euro gained against 13 of its 16 major counterparts after Merkel said Germany is committed to the monetary union even as Greece struggles to avoid a debt default.
“We’ve seen broad-based dollar selling across the market,” William van Rijn, a currency trader at Johannesburg- based Nedbank Group Ltd., said by phone. “The planets are aligned in the rand’s favor at the moment.”
Greece’s risk of default was raised to 50 percent by Moody’s Investors Service as European officials rushed to put together the second bailout plan in two years to stave off renewed financial turmoil in the region.
“In the competition to see who is in the worst state,” Europe’s debt problems “didn’t quite match the poor U.S. data, allowing the euro to remain elevated,” John Cairns and Nema Ramkhelawan, currency strategists at Rand Merchant Bank in Johannesburg, said in a research note. The rand is “tracking the euro once again,” they wrote.
The euro, the currency of most of South Africa’s trade, strengthened 0.4 percent against the dollar.
Some traders may still be unwinding long-dollar positions after South Africa’s Competition Tribunal on May 31 approved Wal-Mart Stores Inc.’s 16.5 billion rand ($2.4 billion) purchase of a stake in Massmart Holdings Ltd., Van Rijn said. The rand has gained 2.9 percent in the past three days.
Bonds gained for a second day, driving yields to the lowest level in almost five months, on concern slowing growth in the U.S. will stifle a recovery in Africa’s biggest economy.
“The slowdown we are seeing abroad will impact on South Africa,” Tradition Analytics researchers led by Johannesburg- based Quinten Bertenshaw said in a research note. “The strength in domestic bonds yesterday is therefore considered entirely appropriate and, in fact, there may be more to come.”
The 6.75 percent securities due 2021 climbed 60 cents to 90.38 rand, driving the yield down 10 basis points, or 0.1 percentage point, to 8.19 percent, the lowest since Jan. 7. The 13.5 percent notes due 2015 added 32 cents to 121.87 rand, reducing the yield eight basis points to 7.42 percent, the lowest since Jan. 12.
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