Bloomberg News

Rand Gains, Paring First Yearly Drop Since 2008, on Rate Outlook

January 03, 2012

Dec. 30 (Bloomberg) -- The rand strengthened for a second day, paring its first annual decline since 2008, after credit growth in November exceeded analysts’ estimates and fueled speculation interest rates will rise next year.

South Africa’s currency, the worst performer this year out of 12 major currencies on Bloomberg, appreciated 1.1 percent to 8.0987 per dollar as of 2:18 p.m. in Johannesburg. The rand has retreated 18 percent in 2011, its first year of decline since depreciating 27 percent in 2008.

Borrowing by households and businesses rose 6.22 percent, compared with 5.5 percent in October. The median estimate in a Bloomberg survey of five economists was 5.9 percent. The Reserve Bank has kept the benchmark rate at 5.5 percent this year to support consumer spending as Europe’s debt crisis sapped demand for exports.

“The data is rand-positive,” Thabi Leoka, a Johannesburg- based analyst at Standard Bank Group Ltd., said in e-mailed comments. “The rand remains at the mercy of global risk sentiment, specifically the extent to which investors look to take advantage of the low interest rate environment to invest in risky, high-yielding assets.”

South Africa’s 13.5 percent bonds due 2015 gained for a third day, cutting the yield two basis points, or 0.02 percentage point, to 6.74 percent. The yield has declined 62 basis points this year, a second year of gains for bondholders.

--Editors: Ash Kumar, Gavin Serkin

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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