The rand rose to its strongest level in more than a week as investors gauged the currency’s slump this year, the worst amongst emerging-market currencies, is overdone. Bonds gained, driving two-year yields to record lows.
The rand appreciated as much as 0.6 percent to 8.8098 per dollar, its strongest level since Feb. 15. It traded at 8.8115 as of 4:44 p.m. in Johannesburg. Yields on 13.5 percent bonds due September 2015 fell four basis points, or 0.04 percentage point, to 5.25 percent.
The currency has declined 3.7 percent this year as South Africa struggles to recover from three credit-rating downgrades and the worst labor unrest since apartheid ended in 1994. Data tomorrow may show fourth-quarter growth accelerating as the effects of mining strikes wear off. Finance Minister Pravin Gordhan delivers his annual budget speech on Feb. 27.
“I consider the recent depreciation to be excessive,” Thu Lan Nguyen, a Frankfurt-based foreign-exchange strategist at Commerzbank AG, said in an e-mailed response to questions. “Since the negative consequences of the strike wave and political risks are likely to fade, I see room for a correction.”
South Africa’s gross domestic product probably expanded 1.7 percent in the three months through December, from 1.2 percent in the previous quarter, according to the median estimate of 20 economists surveyed by Bloomberg.
“We’ve seen some good dollar selling interest on any sign of weakness,” William van Rijn, a currency trader at Nedbank Group Ltd. in Johannesburg, said by phone. “The rand has performed well, given that there is a lot of data due this week.”
The currency appreciated after failing to breach the 8.95 level in the past week, and could advance to 8.70 if it closes below 8.75 per dollar, Van Rijn added.
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