Bloomberg News

Rand Gains for Second Day Versus Dollar as Stocks, Metals Rise

June 28, 2011

June 28 (Bloomberg) -- The rand gained for a second day against the dollar as investor appetite for riskier emerging- market assets rose on optimism Greece’s creditors will agree to roll over the nation’s debt.

The rand advanced as much as 0.5 percent to 6.8393 per dollar and traded 0.4 percent stronger at 6.8482 as of 3:17 p.m. in Johannesburg. It traded at 9.8033 per euro, little changed from yesterday’s close.

Commodity prices gained the most in a month, with gold and platinum, which account for 20 percent of South Africa’s exports, rising. Emerging-market stocks followed U.S. equity markets higher, and the FTSE/JSE All Share Index climbed for a third day, adding as much as 0.7 percent as mining companies including Impala Platinum Holdings Ltd. and Anglo American Plc advanced.

“Emerging-market currencies, the rand included, will enjoy some respite” as stock prices rise, Tradition Analytics researchers led by Johannesburg-based Quinten Bertenshaw wrote in a research note. “The news flow has been positive enough to squeeze investors out of the risk-off trade.”

Foreign investors bought 1.85 billion rand ($269.6 million) of South African bonds yesterday, bringing foreign investor purchases of the country’s debt this quarter to 43.9 billion rand, according to JSE Ltd. data.

The rand will probably trade in a range between 6.82 and 6.92 per dollar today, Tradition said.

‘Patriotic Conscience’

The euro advanced versus against the majority of its most- traded counterparts after French President Nicolas Sarkozy said France is working on a plan to roll over 70 percent of Greece’s debt. Greek Prime Minister George Papandreou called on lawmakers to obey their “patriotic conscience” and back tougher austerity measures, as they began to debate a five-year budget plan yesterday.

The rand often tracks the euro, which accounts for 45 percent of South Africa’s exports and 34 percent of its imports. The correlation between the two currencies has been 0.854 over the past month. A value of 1 would mean they moved in lock step.

Bonds declined for the first day in three after yields rose at a central bank auction of notes maturing in 2020 on speculation government debt has become expensive relative to the outlook for inflation and interest rates.

The Pretoria-based Reserve Bank sold 1.3 billion rand of 7.25 percent bonds due 2020 at an average yield of 8.29 percent, 10 basis points, or 0.1 percentage point, higher than the previous auction on June 1. It also auctioned 800 million rand of 7 percent securities due 2031 at a yield of 8.81 percent.

‘Very Weak’

“Today’s auction was very weak,” Leon Myburgh and Coura Fall, analysts at Citibank NA in Johannesburg, said in an e- mailed comment. “The bid-to-cover ratio was quite low for both bonds compared with recent auctions, showing demand was poor.”

The benchmark 6.75 percent securities due 2021 dropped 27 cents to 89.22 rand, driving the yield up four basis points to 8.39 percent. The 13.5 percent notes due 2015 slipped 15 cents to 121.42 rand, boosting the yield three basis points to 7.46 percent.

--Editors: Linda Shen, Peter Branton

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


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