The rand strengthened, rebounding from a three-week low, as gains in commodity prices boosted prospects for South Africa’s raw material exports.
South Africa’s currency appreciated 0.6 percent to 7.6552 per dollar by 3:20 p.m. in Johannesburg, after retreating 2.3 percent yesterday, its biggest one-day decline since Dec. 8. The yield on South Africa’s bonds maturing in 2024 increased.
The Standard & Poor’s GSCI Index (SPGSCI) of 24 raw materials gained as the prices of metals including platinum, copper and gold rose amid signs the U.S. economy is recovering. Metals and other commodities account for 65 percent of South Africa’s exports. The rand declined to its weakest level since Feb. 22 yesterday as commodities tumbled after the U.S. Federal Reserve damped expectations of further monetary easing.
The rand was “part of a commodity currency sell-off yesterday and we’re seeing a rebound across the board,” Jim Bryson, head of foreign-exchange trading at Rand Merchant Bank in Johannesburg, said by phone. “Commodity currencies have recovered somewhat today, although we’re not out of the danger area for the rand yet.”
The currencies of other commodity-exporting nations including New Zealand and Australia also gained.
U.S. manufacturing expanded and fewer Americans filed for unemployment benefits, reports said today. U.S. Treasuries fell, with 10-year yields increasing for a seventh day today. Fed policy makers said this week they expect “moderate economic growth.”
Clawing Back Gains
“The rand took a sharp knock yesterday, and it is clawing back some of that loss,” Ian Cruickshanks, head of treasury strategic research at Johannesburg-based Nedbank Group Ltd. (NED), said by phone. “But the rand’s moves depend on what happens to the dollar.”
The U.S. currency weakened today against 12 out of 16 most- traded currencies monitored by Bloomberg.
The yield on South Africa’s $1.5 billion of 4.665 bonds due 2024 climbed three basis points to 4.30 percent, the highest in three weeks, tracking the increase in U.S. Treasury yields. The extra yield investors demand to hold South Africa’s debt rather than U.S. Treasuries widened by one basis points to 201 basis points.
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