Rand Hits Five-Month High as Yields Fall on ECB Loan Operation

The rand advanced to a five-month high and bonds rose on expectation the European Central Bank’s injection of liquidity into the region’s banks will boost appetite for South African stocks and debt.

The currency climbed as much as 0.6 percent to 7.5068 per dollar, the strongest level since Sept. 19. It traded 0.4 percent stronger at 7.5208 per dollar as of 11:45 a.m. in Johannesburg, a fifth day of gains. The yield on the nation’s 77 billion rand ($10 billion) of 6.75 percent bonds due 2021 fell two basis points, or 0.02 percentage point, to 7.86 percent.

The ECB will tomorrow allot a second round of unlimited three-year funds to lenders. Global emerging-market stocks soared on expectation the long-term refinancing operation, or LTRO, will boost demand for higher-yielding assets. The rand gained as much as 1.7 percent on Dec. 21, when the ECB last lent support to the region’s banks.

“A risk-on environment is prevailing at the moment,” George Glynos, an analyst at ETM Analytics in Johannesburg, said in e-mailed comments. “As we look forward to tomorrow’s LTRO by the ECB, the significance of this event should not be underestimated. This has certainly helped emerging-market currencies and the rand has tagged along.”

European banks are likely to tap the ECB for 470 billion euros ($632 billion) in three-year funds, according to a Bloomberg News survey of analysts. That would compare with the 489 billion euros borrowed at the LTRO Dec. 21.

To contact the reporters on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net;

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

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