Rand Gains Most in 11 Months as PMI Helps Rebound From Oversold

The rand gained the most in 11 months as technical indicators signaled the currency’s slump to a four-year low in May was overdone and after the nation’s purchasing managers’ index topped estimates.

The exchange rate slid 11 percent against the dollar last month, pushing its 14-day relative strength index to as high as 86. The RSI had been above 70, the threshold that signals a currency is oversold, since May 20 before dropping to 67 today. The rand, which was the world’s most oversold major currency in May, appreciated 2.5 percent to 9.8443 per dollar as of 5:56 p.m. in Johannesburg, the most on a closing basis since June 29.

“The rand has been oversold for quite some time, and we’re certainly hoping for some consolidation,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. (NED), said by phone from Johannesburg. South Africa’s currency may extend gains if it breaches 9.85 per dollar, seen as a significant resistance level to further gains, he added.

Yields on benchmark 10.5 percent bonds due December 2026 declined 14 basis points, or 0.14 percentage point, to 7.46 percent, stemming five days of increases. South Africa’s PMI dropped to 50.4 percent in May from 50.5 percent in the previous month, remaining above the 50 level that indicates an expansion. The median estimate of economists in a Bloomberg survey was 49.9. Automobile sales rose 7.5 percent, beating the 5.8 percent median estimate of three economists on Bloomberg.

South Africa’s currency pared gains after a shooting at Lonmin Plc (LON)’s Marikana mine, and as Glencore Xstrata Plc fired about 1,000 workers who participated in an unauthorized strike at three South African chrome mines, Nalla said.

The rand has slumped 14 percent since this year on concern the labor disruptions will cut output in the mining industry, which accounts for more than 50 percent of the nation’s exports.

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

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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