Bloomberg News

Rand Set for Monthly Gain as U.S. Growth Slows, Gold Soars

July 29, 2011

July 29 (Bloomberg) -- The rand headed for its biggest monthly gain versus the dollar since April after the U.S. economy grew less than forecast in the second quarter, dimming demand for dollar assets and driving gold to a record.

The rand gained as much as 0.2 percent to 6.6940 per dollar and traded little changed at 6.7154 as of 3:46 p.m. in Johannesburg, bringing its advance this month to 1.7 percent. The rand declined 0.5 percent versus the euro to 9.6470.

The currency of Africa’s biggest economy erased an earlier decline after gold soared as much as 1.2 percent in London to $1,632.80 an ounce, beating the previous record of $1,628.05 set two days ago, as investors sought assets that would protect them from a slowdown in the world’s biggest economy. South Africa is the world’s fifth-largest producer of the metal, which together with platinum accounts for 20 percent of the nation’s exports.

“We’ve seen the dollar come under pressure after the weak GDP number,” Chris Becker, an analyst at Econometrix Treasury Management, which advises clients on currency and bond purchases, said by phone from Johannesburg. “Gold has rallied quite a bit, and the rand has also benefited.”

Emerging-market stocks extended declines, and South Africa’s benchmark share index slumped to its lowest in a month as the U.S. growth data raised concern global demand is set to retreat. Earlier, stocks fell and the rand weakened after U.S. lawmakers delayed a vote on a plan to raise the debt limit to avert a default and Moody’s Investors Service said it may cut Spain’s credit rating.

“There have been no positive developments concerning the U.S. debt ceiling and this morning’s decision by Moody’s to place Spain under a review for a possible downgrade will not help markets ahead of the weekend,” BNP Paribas SA analysts led by London-based Paul Mortimer-Lee wrote in an e-mailed research note. “We doubt there will be a lot of appetite for risk-on positions today.”

Bonds rose, with 6.75 percent debt due 2021 slipping 0.4 percent cents to 89.64 rand, reducing the yield by six basis points, or 0.06 percentage point, to 8.26 percent.

--Editors: Ana Monteiro, 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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