July 19 (Bloomberg) -- The rand gained for the first day in four, rebounding from a two-month low versus the dollar, as commodities and stocks rallied, outweighing concern that the European and U.S. debt crises will worsen.
The rand gained as much as 1 percent to 6.9224 per dollar, and traded 0.7 percent stronger at 6.9409 as of 4:07 p.m. in Johannesburg. The currency depreciated 0.2 percent to 9.8526 per euro.
South Africa’s benchmark stock index rose, led by mining companies including Anglo American Plc and BHP Billiton Ltd, after gold touched a record and platinum climbed to the highest in more than a month. The two metals together account for 20 percent of South Africa’s export earnings. The euro gained against the dollar and U.S. stock-index futures extended gains today after housing starts rose in June at the fastest pace in five months.
“Today’s better environment derives from a bounce in both the euro-dollar and Wall Street,” John Cairns and Nema Ramkhelawan, currency strategists at Rand Merchant Bank in Johannesburg, said in a research note. “The move breaks the downward spiral of all risky assets. We can breathe easier.”
The euro rallied against the dollar and rose from almost a record low versus the Swiss franc on bets European officials are approaching an agreement over measures designed to contain the region’s sovereign-debt crisis. The rand often tracks the euro, which pays for 45 percent of South Africa’s exports, with a correlation of 0.84 over the past month. A value of 1 would mean they moved in lock step.
European Union government chiefs plan to meet for the second time in a month on July 21, aiming to break a deadlock over a new Greek rescue that has spooked investors. Spanish and Italian bonds yields surged yesterday, piling pressure on officials to end the turmoil. Spain and Greece sell as much as 5.75 billion euros ($8.1 billion) of bills today.
“Multi-day risks remain very much for rand losses, and as much as the market isn’t panicking, it’s not clear that we shouldn’t,” the RMB analysts wrote. “Problems are certainly not over.”
The premium of one-month options to sell rand versus the dollar over those to buy the rand has climbed 86 basis points, or 0.86 percentage point, to 3 percentage points in the past two weeks, indicating options traders believe the rand is more likely to decline than to gain in coming weeks.
South African bonds gained on speculation the central bank won’t raise interest rates on Thursday to cool inflation caused by rising fuel and food costs.
The Pretoria-based Reserve Bank’s Monetary Policy Committee will leave its benchmark rate at 5.5 percent on Thursday, according to all 22 analysts in a Bloomberg survey.
The 6.75 percent securities due 2021 added 27 cents to 88.99 rand, driving the yield down five basis points, or 0.05 percentage point, to 8.43 percent.
--Editors: Linda Shen, Alex Nicholson
To contact the reporter on this story: Robert Brand in Cape Town at firstname.lastname@example.org
To contact the editor responsible for this story: Gavin Serkin at email@example.com