July 1 (Bloomberg) -- The rand headed for its biggest weekly advance in four against the dollar, boosted by investor demand for higher-yielding assets on optimism Europe may have averted a Greek debt default.
The South African currency added as much as 0.2 percent to 6.7476 per dollar, and traded at 6.7715 as of 3:09 p.m. in Johannesburg, bringing its increase this week to 1.9 percent, the biggest since the week ending June 3. It appreciated 0.1 percent to 9.8055 per euro.
The euro was poised for its first weekly gain in a month versus the dollar and emerging-market stocks rose for a fifth day as the U.S. currency lost its allure as a safe-haven currency after officials agreed on 85 billion euros ($123 billion) of new aid to Greece.
“The rand has strengthened markedly this week, buoyed by optimism over the temporary resolution of the crisis in Greece and consequent rise in risk-on sentiment,” Nomvuyo Guma, an analyst at Johannesburg-based Standard Bank Group Ltd., Africa’s biggest rand trader, said in a research note.
Euro-area nations and private investors will contribute 70 percent of new aid to Greece, with the International Monetary Fund offering the rest, Thomas Wieser, head of the ministry’s economic policy and financial markets department, said at a briefing late yesterday in Vienna. European Union finance chiefs also hold a conference call tomorrow to free up a 12 billion- euro payment overdue from the original rescue.
“Heading into the weekend, the fact that the Greek risk event is behind us will leave the markets far more settled than they have been recently,” Tradition Analytics researchers led by Johannesburg-based Quinten Bertenshaw said in a research note. “For the time being the bias remains generally supportive of emerging markets and the rand.”
The rand earlier declined on speculation demand for South Africa’s metal exports will fall as China’s economy slows. Commodity prices retreated for a second day and metals including platinum and for copper tumbled after China’s Purchasing Managers’ Index slipped to the lowest level since February 2009, signaling that the world’s second-biggest economy is cooling as export demand weakens and the government reins in credit to control inflation.
Bonds fell after the central bank said South Africa’s economic recovery remains slow and fragile and higher domestic spending isn’t pushing up prices.
“I don’t think we will see demand-side pressures coming into the economy any time soon,” Monde Mnyande, the chief economist of the Reserve Bank, said in an interview in Pretoria, the capital, after the release of the bank’s annual economic report.
A slow recovery may reduce pressure on the central bank to raise its benchmark interest rate from a 30-year low of 5.5 percent. The bank, which cut rates three times in 2010 to support growth, has left borrowing costs unchanged this year.
The 13.5 percent notes due 2015 slid 7 cents to 121.13 rand, driving the yield up one basis point, or 0.01 percentage point, to 7.52 percent. The 6.75 percent securities due 2021 retreated 8 cents to 88.94 rand, lifting the yield one basis point to 8.44 percent.
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