The rand gained for the first time in four days and bonds advanced as speculation Greece will remain in the euro zone after elections this weekend bolstered demand for riskier assets.
South Africa’s currency appreciated as much as 1.1 percent and traded 0.4 percent stronger at 8.4347 as of 4 p.m. in Johannesburg. Yields on the nation’s 6.75 percent bonds due 2021 dropped four basis points, or 0.04 percentage point, to 7.61 percent, a three-week low.
Polls show the June 17 election in Greece may be a close race. New Democracy, Greece’s largest pro-bailout party, led anti-bailout Syriza by 22.7 percent to 22 percent, according to an ANT1 TV poll on June 1, the last date surveys were made public. An election on May 6 failed to produce a working government majority. The euro area is South Africa’s biggest regional trading partner, buying 22 percent of its exports.
“Risky assets are in for a bumpy ride in the run-up to this weekend’s Greek elections,” Nomvuyo Guma, a currency strategist at Standard Bank Group Ltd. in Johannesburg, wrote in e-mailed comments. “However, given our expectation that Greece will opt to remain in the euro zone, the rand could regain some ground.”
The rand’s one-month implied volatility against the dollar rose 50 basis points today to 21 percent, the highest this year, as traders anticipate wider swings in the currency in coming weeks.
The South Africa currency declined 1.9 percent in the previous three days on concern Italy will become the next focus of Europe’s debt crisis after Spain requested a bailout for its banks. The rand failed to weaken beyond 8.50, a so-called resistance level where traders clustered orders to buy the currency, said Quinten Bertenshaw, a Johannesburg-based analyst at Tradition Analytics, wrote in e-mailed comments.
“What is interesting to note is the way in which the dollar-rand has run into resistance towards the 8.50 level in the previous two trading sessions,” Bertenshaw wrote. “There is nothing in the charts this morning that changes that. Consolidation in an 8.38 to 8.52 range seems plausible.”
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