Rand Rallies to Two 1/2-Week High as Global Economic Growth Concerns Ease

The rand strengthened to a 2 1/2- week high versus the dollar after U.S. jobless claims fell and the European Union increased its economic growth forecast, allaying fears of a renewed global recession.

The rand appreciated as much as 0.8 percent to 7.2321 per dollar, the strongest level since Aug. 19, and traded 0.7 percent stronger at 7.2437 by 4:37 p.m. in Johannesburg, from a previous close of 7.2911. Against the euro, the rand gained 0.5 percent to 9.2827.

The ECB today raised its forecasts for 2010 economic growth to about 1.6 percent from 1 percent previously and said it would extend emergency lending measures to banks into 2011, alleviating growth concerns in the 16-member region. Initial U.S. jobless claims fell by 6,000 to 472,000 in the week ended Aug. 28, in line with the median forecast in a Bloomberg survey.

Higher-yielding assets like the rand were “making short- term gains” because “the market is looking for good news at the moment,” said Nigel Rendell, an emerging-market strategist at RBC Capital in London.

Reports yesterday showed purchasing managers’ indexes improved in China and South Africa while U.S. manufacturing grew more than forecast, helping the rand rebound from a one-month low reached Aug. 31. Manufacturing, which accounts for about 15 percent of South Africa’s economy, has expanded every month since December even after the rand rallied almost 30 percent versus the dollar since the start of last year.

Bonds, FRAs

Government bonds snapped a two-day advance in South Africa, with the benchmark 13.5 percent security due September 2015 falling 30 cents to 125.79 rand. The yield rose 6 basis points to 7.28 percent.

FRAs, or forward-rate agreements, showed traders reduced bets the central bank will lower its 6.5 percent benchmark interest rate when it announces its next decision on Sept. 9. The cost of three-month cash contracts due in one month rose 3 basis points to 6.22 percent, five basis points above the record low reached on Aug. 30.

A report today also showed South African vehicle sales surged an annual 36.9 percent in August as record-low interest rates spurred consumer spending. Vehicle sales rose to 46,377 last month, the Pretoria-based National Association of Automobile Manufacturers said in an e-mailed statement.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net

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