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Rand Strengthens to Highest in 3-1/2 Months on Nedbank Buyout Speculation
The rand strengthened to a 3 1/2- month high against the dollar as speculation a foreign investor may purchase South Africa’s fourth-largest bank boosted sentiment toward the currency.
The currency of Africa’s biggest economy appreciated as much as 0.8 percent to 7.2932 per dollar, the strongest level since April 15, before trading at 7.3296 as of 4:35 p.m. in Johannesburg, from a previous close of 7.3537.
HSBC Holdings Plc and Standard Chartered Plc are in talks to buy Old Mutual’s 52-percent holding in South Africa’s Nedbank, the Financial Times reported at the weekend in Mark Kleinman’s “In the Loop” column. That may add to Nippon Telegraph & Telephone Corp.’s $3.2 billion acquisition of Dimension Data Plc of which half is expected to flow into South Africa when the deal concludes in October.
“The bias is clearly for a stronger rand,” said John Cairns, head of foreign-exchange research at Rand Merchant Bank in Johannesburg. “The NTT-Didata deal will bring in another 12 billion rand and now there is fresh speculation of an offshore bid for Nedbank.”
Foreign investors have been net purchasers of 79.7 billion rand ($10.9 billion) of South African stocks and bonds this year, according to data from the JSE Ltd., which operates the nation’s exchanges. Such inflows have helped the rand hold on to last year’s almost 28 percent rally against the dollar.
“Rising risk appetite is certainly a reason” for the capital inflows, said Cairns.
Unemployment Rises
South Africa’s currency maintained gains even after a government report showed the nation’s unemployment rate, the highest of 62 countries tracked by Bloomberg, rose in the second quarter. The jobless rate increased to 25.3 percent from 25.2 percent in the first quarter, Statistics South Africa said in Pretoria.
Government bonds slid, with South Africa’s benchmark 13.5 percent security due September 2015 falling 8 cents to 124.32 rand. The yield on the bond increased 1 basis point to 7.66 percent.
Investors reduced bets that South Africa’s central bank may lower its 6.5 percent benchmark interest rate when it next meets on Sept. 9, forward-rate agreements show. The cost of three- month contracts for cash in three months rose 7 basis points to 6.31 percent.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
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