Rand Strengthens to Two-Week High After Central Banks Add Liquidity

The rand gained to its strongest level in more than two weeks against the dollar and bond yields fell the most in three months after central banks acted together to make additional funds available to banks.

South Africa’s currency advanced as much as 2.8 percent to 8.1202 per dollar, the strongest level since Nov. 15. It traded 2.2 percent higher at 8.1718 as of 3:54 p.m. in Johannesburg, paring its decline this month to 3.7 percent. The yield on 13.5 percent bonds due 2015 fell 20 basis points, or 0.2 percentage point, to 6.76 percent, the most in one day since Aug. 10.

The central banks of the U.S., the euro region, Canada, the U.K., Japan and Switzerland agreed to cut the cost of providing dollar funding via swap arrangements, the Federal Reserve said in a press release. They also agreed to make other currencies available as needed, it said. The dollar fell against all its most-traded peers.

“It means banks are not going to be locked out of dollar funding,” Ian Cruickshanks, head of treasury strategic research at Johannesburg-based Nedbank Capital, a unit of South Africa’s fourth-biggest lender, said by phone. “It caught everyone by surprise; there was a lot of bad language in the dealing room.”

South Africa’s benchmark stock index jumped the most in two months, and commodity prices surged, with Standard & Poor’s GSCI index of raw materials climbing to its highest in two weeks.

“The thinking is, there will be more liquidity, maybe we can get the banks lending again, maybe that will stop the downturn,” Cruickshanks said.

Earlier, the rand reversed its decline against the dollar after China cut reserve requirements for its banks, boosting appetite for riskier, emerging-market assets.

The currency held its gains after the nation posted a 9.6 billion-rand ($1.2 billion) trade deficit in October, the biggest in 10 months.

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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