Bloomberg News

Rand Gains, Set for 1st Weekly Advance in Four on Stimulus Bets

July 27, 2012

The rand gained for a third day, set for its first weekly advance in four, as stocks and commodities surged on speculation central banks from Europe to the U.S. will boost efforts to spur economic growth.

South Africa’s currency strengthened 0.9 percent to 8.1892 as of 5:08 p.m. in Johannesburg, extending its gain this week to 1.2 percent. Yields on the nation’s 6.75 percent bonds due 2021 fell two basis points, or 0.02 percentage point, to 6.55 percent.

German Chancellor Angela Merkel and French President Francois Hollande said they were ready to do “everything” necessary to protect the euro, a day after European Central Bank President Mario Draghi pledged to preserve the single currency, suggesting policy makers may intervene in bond markets. The U.S. economy expanded at a slower pace in the second quarter, spurring speculation the Federal Reserve will add stimulus next week.

“Markets have rightly rallied hard and the mood remains positive,” John Cairns and Josina Solomons, currency strategists at Rand Merchant Bank in Johannesburg, wrote in e- mailed comments. “Commodities rallied in overnight trade as the pledge by the ECB revived risk appetite. Next week’s ECB meeting is now up there with the Fed meeting in terms of importance.”

The Federal Open Market Committee will announce its rate decision on Aug. 1.

Emerging-market stocks rose, sending a benchmark index to its biggest gain this month. The Standard & Poor’s GSCI Index of raw materials climbed to its highest on a closing basis since July 20. Commodities accounted for 45 percent of South Africa’s exports in 2011, according to government data.

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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