Bloomberg News

Rand Set for Second Weekly Gain as Europe Debt Concern Fades

November 13, 2011

Nov. 11 (Bloomberg) -- The rand strengthened for a second day, set for a second weekly gain, after Italy’s senate approved a budget bill and Greece appointed a new leader, easing concern the euro region’s debt crisis will worsen.

South Africa’s currency gained 0.4 percent to 7.9462 per dollar at 3:11 p.m. in Johannesburg, bringing its weekly advance to 0.5 percent. The rand traded at 10.8518 per euro for a five- day gain of 0.4 percent, a third week of advances.

The euro, the currency of South Africa’s biggest trading partner, rose for a second day versus the U.S. currency as former European Central Bank Vice President Lucas Papademos prepared to be sworn in as Greek prime minster while the Italian budget vote paved the way for a new administration that may be led by former European Union Competition Commissioner Mario Monti. Emerging-market stocks gained the most in a week.

“The rand is still at the mercy of global factors,” Michael Keenan, a Johannesburg-based analyst at Standard Bank Group Ltd., and colleagues wrote in e-mailed comments. “Global risk appetite improved” as news from Europe boosted sentiment, they wrote.

Bonds fell for a third day, pushing 10-year yields to the highest in more than two weeks, as investors reduced bets on a central bank interest-rate cut.

The yield on 6.75 percent securities due 2021 climbed seven basis points, or 0.07 percentage point, to 7.999 percent. The yield has increased 13 basis points this week.

The Reserve Bank yesterday left its benchmark interest rate unchanged and said the weaker rand and rising food prices will push inflation above the 6 percent target this quarter.

The central bank’s statement “showed concern about the economic outlook as well as inflation developments,” Salomon Guillaume, a London-based analyst at Societe General SA, said in e-mailed comments. “We expect higher yields to unfold in coming sessions.”

Forward-rate agreements fixing three-month rates in six months rose to 5.38 percent, having gained 16.5 basis points since yesterday’s decision as investors pared rate cut bets.

--Editors: Peter Branton, Alex Nicholson

To contact the reporter on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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