The rand gained as traders gauged the currency’s slide to a three-year low was overdone, and as stocks pared declines, boosting investor appetite for riskier assets.
South Africa’s currency advanced as much as 1 percent to 8.4936 per dollar as of 3:32 p.m. in Johannesburg, rebounding from a 0.7 percent retreat in earlier trading. The currency fell to 8.7051 on June 1, the weakest level since May 2009. Yields on the nation’s 6.75 percent bonds due 2021 were little changed at 7.75 percent.
European stocks pared declines and U.S. equity index futures advanced as Spanish borrowing costs decreased, easing concern the euro region’s debt crisis is spreading. South Africa’s benchmark stock index rebounded from its lowest level in a week. The euro, the currency of South Africa’s biggest regional trading partner, climbed for a second day.
“Global markets have consolidated a bit, and that’s why we’ve seen a bit of a pull-back for the rand,” Ion de Vleeschauwer, the Johannesburg-based chief dealer at Bidvest Bank Ltd., South Africa’s biggest chain of money-changers, said by phone. “The euro is looking perkier today and that’s helped sentiment.”
The rand often trades in tandem with the euro, with a statistical correlation of 0.7 over the past year. A value of 1 would mean they moved in lock step.
The rand may resume declines on deepening concern that slowing growth in the U.S. and China will cut demand in the two largest economies. The currency’s three-month implied volatility against the dollar rose to 21.03 percent today, the highest since January, as options traders anticipate wider price swings in coming months.
China’s non-manufacturing purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. U.S. unemployment rose to 8.2 percent in May and payrolls increased less than the most-pessimistic forecast in a Bloomberg News survey of economists, Labor Department figures showed June 1. European leaders remain divided on solutions for the region’s debt crisis.
“Commodity currencies are already on the defensive in the wake of the China data,” Nomvuyo Guma, a currency strategist at Standard Bank Group Ltd. in Johannesburg, said in e-mailed comments. “This combination of forces will continue to weigh on the rand.”
Standard & Poor’s GSCI index of commodities declined as much as 1.6 percent. Copper for three-month delivery slumped to the weakest in more than five months. Metals and other commodities account for 45 percent of South Africa’s exports, according to government data. China is South Africa’s largest trading partner, accounting for 13 percent of exports last year.
The currencies of other large commodity producers including Australia and Canadian also declined.
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