The rand strengthened, reversing earlier losses, after a report showed South Africa posted an unexpected trade surplus last month as a backlog in exports was cleared after the end of a strike that crippled ports.
The currency appreciated for the first time in three days, gaining 0.4 percent to 7.3285 to the dollar as of 3:56 p.m. in Johannesburg, from a close yesterday of 7.3458. The increase extended the currency’s fourth weekly advance to 1.6 percent. Earlier today, the rand declined as much as 0.4 percent to as weak as 7.3769.
Africa’s biggest economy posted a trade surplus of 5.6 billion rand ($762 million) in June, following a 302 million rand shortfall the previous month, the South African Revenue Service said in an e-mailed statement. The median estimate of 12 economists surveyed by Bloomberg was for a 1.6 billion-rand deficit.
“At first glance today’s surprisingly large trade surplus could have been regarded as rand-positive from a current-account and overall balance-of-payments perspective,” Michael Keenan, a currency strategist at Standard Bank Group Ltd. in Johannesburg, wrote in a client note. “However, given the anomalies associated with the port strike activity and World Cup disruptions we remain of the opinion that the trade balance will widen over the coming months.”
The surplus “was partly due to postponed merchandise trading activities” due to the 18-day strike by workers at state-owned rail and port operator Transnet Ltd. in May, the revenue service said. Exports surged 18 percent to 55.56 billion rand in June, the same month that South Africa hosted the month- long soccer World Cup.
An improvement in South Africa’s trade account may curb an expected widening of the deficit on South Africa’s current account, the broadest measure of trade in goods and services. The current-account shortfall is expected to reach 4.9 percent of gross domestic product this year and 5.3 percent in 2011, the National Treasury said on Feb. 17.
South Africa relies on foreign purchases of its stocks and bonds to offset the shortfall and prevent the rand from weakening. Foreign investors have been net buyers of almost 80 billion rand ($11 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 surge 28 percent against the dollar since the start of 2009.
The rand rallied to a 3 1/2-month high this week as foreign investors boosted purchases of the nations assets and speculation increased that a U.K. lender may purchase Johannesburg-based Nedbank Group Ltd.
HSBC Holdings Plc and Standard Chartered Plc are in talks to buy Old Mutual’s 52 percent holding in Nedbank, the Financial Times reported in Mark Kleinman’s “In the Loop” column at the start of last weekend.
“There are still guys out there looking for yield so there have been strong inflows in South Africa this week, especially into the bond market,” said Brigid Taylor, a senior currency trader at Rand Merchant Bank in Johannesburg. Speculation of a foreign buyout of Nedbank “helps sentiment” toward the rand, she said.
Government bonds rose, extending a weekly advance, with the benchmark 13.5 percent security due September 2015 rising 23 cents to 124.68 rand, reducing the yield by 5 basis points 7.58 percent. The bond rose 61 cents in the week, reducing the yield by 14 basis points.
Money-market investors reduced bets that South Africa’s central bank will reduce its 6.5 percent main rate at its next meeting on Sept. 9, forward-rate agreements show. The cost of three-month contracts for cash in three months rose 0.5 basis point from yesterday’s close to 6.23 percent.
The so-called three-month FRA rate dropped 9.5 basis points in the week.