The rand advanced for the first time in three days as stocks and commodities rose after two German officials indicated a rolling back of resistance to a full sovereign bailout, raising investor appetite for riskier assets.
South Africa’s currency gained as much as 1 percent, and traded 0.7 percent stronger to 8.7306 per dollar at 4:20 p.m. in Johannesburg, the best performance among 16 major currencies tracked by Bloomberg. Yields on 6.75 percent bonds due 2021 dropped five basis points to 6.73 percent, the lowest in more than a week.
Michael Meister and Norbert Barthle, officials within Chancellor Angela Merkel’s Christian Democratic bloc, said the country is open to Spain seeking a precautionary credit line. The euro strengthened and stocks and commodities rallied.
“The euro has been making good progress, and the rand has benefitted from that,” William van Rijn, a currency trader at Nedbank Group Ltd. in Johannesburg, said by phone. Prospects of a bailout for Spain supported the currency, he added.
The rand often moves in tandem with the euro, with a statistical correlation of 0.7 over the past year, according to data compiled by Bloomberg. A value of 1 would mean they moved in lock step.
Reports today showed German confidence rose for a second month and U.S. factory output topped analysts’ estimates after the Commerce Department posted better-than-projected retail sales.
Copper rebounded from a one-month low after Freeport- McMoRan Copper & Gold Inc., the biggest publicly-traded copper producer, said consumption in China is being sustained. Metals and other commodities account for 45 percent of South Africa’s exports, according to government data.
“Global developments have turned more positive,” John Cairns and Josina Solomons, currency strategists at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “Commodities are taking direction from the broad rally in risky assets.”
Emerging-market stocks gained, with the benchmark index rising to the highest level in more than a week. South Africa’s main stock gauge rose for a second day to a record.
The rand’s one-month implied volatility against the dollar declined 20 basis points to 16.85 percent, indicating that options traders see swings in the currency narrowing over coming weeks. The extra yield investors demand to hold South African dollar bonds rather than U.S. Treasuries narrowed 11 basis points to 176, compared with an eight-point drop to 279 for the average of emerging-market debt.
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