Bloomberg News

Rand Advances for Second Day on Italian Bonds Sale, EU Meeting

November 29, 2011

Nov. 29 (Bloomberg) -- The rand gained for a second day as an oversubscribed Italian debt auction and talks to expand Europe’s bailout fund boosted appetite for riskier emerging market assets, outweighing lower-than-forecast domestic growth.

South Africa’s currency rose as much as 1.5 percent to 8.2684 per dollar and traded 0.1 percent stronger at 8.3825 as of 4:26 p.m. in Johannesburg. The rand increased 1.8 percent yesterday after La Stampa reported the International Monetary Fund is preparing a 600 billion-euro ($799 billion) loan for Italy, which the Washington-based lender later denied.

Demand for Italy’s 2014 bonds was 1.5 times the amount on offer, up from 1.35 times at the previous auction. The country sold 7.5 billion euros ($10 billion) of debt. Finance ministers are meeting in Brussels to discuss an expansion of the European Financial Stability Facility, Europe’s bailout fund.

“The market is not really focusing on domestic factors, it’s more focused on what is happening offshore,” David Gracey, head of currency and derivatives trading at Investec Bank Ltd. said by phone. “Essentially we are just tracking the euro.”

Gross domestic product accelerated from an annualised 1.3 percent in the second quarter to 1.4 percent in the third, Statistics South Africa said today in Pretoria. The median estimate in a Bloomberg survey of 20 economists was for the economy to expand 1.8 percent.

“It’s not good news,” Nicky Weimar, an economist at Nedbank Group Ltd., said in a phone interview from Johannesburg today. “Manufacturing was a lot weaker than anybody expected.”

Bonds strengthened, with the yield on South Africa’s 8.25 percent bonds due 2017 falling 4.5 basis points, or 0.045 percentage point, to 7.552 percent.

Credit Growth Expanded

The Reserve Bank has kept the benchmark rate at a 30-year low of 5.5 percent this year to support growth in the face of increasing price pressures. Slower growth and a slump in investors’ risk appetite caused the rand to plunge 20 percent against the dollar this year, the worst-performer of the more than 20 emerging-market currencies tracked by Bloomberg.

Credit growth expanded at a faster pace in October than in the previous month as the lending rate remained at a 30-year low. Borrowing by households and businesses rose 5.5 percent from a revised 5.4 percent in September, the Pretoria-based Reserve Bank said on its website today. The median estimate in a Bloomberg survey of 16 economists was 5.7 percent.

--Editors: Ash Kumar, Peter Branton

To contact the reporter on this story: Stephen Gunnion in Johannesburg at

To contact the editor responsible for this story: Gavin Serkin at

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