The rand gained for a third day, heading for its first weekly advance in four, after some of the largest emerging-market nations announced plans to combine resources to stave off financial shocks.
China, Brazil, India, Russia and South Africa, known as the BRICS nations, will contribute to a $100 billion fund to shield against “unintended negative spillovers” from unconventional monetary policies in developed economies, according to a statement yesterday at the Group of 20 summit in St. Petersburg, Russia. South Africa’s foreign-currency and gold reserves rose more than estimated in August after the dollar price of bullion increased.
Emerging-market currencies including the rand are facing the steepest declines since 2008 on speculation that the Federal Reserve is set to reduce monetary stimulus as the U.S. economy recovers. South Africa’s budget deficit widened to 96.3 billion rand ($9.5 billion) in the year to July from 87 billion rand in the prior period, while second-quarter current-account data will be released next week.
“Access to a $100 billion pool of funds during times of severe global capital slowdown should be a positive factor for the rand when concerns about the country’s twin deficits are very high,” Theuns de Wet, head of fixed-income research at Rand Merchant Bank in Johannesburg, said in an e-mail. Though details are lacking, news of the fund “kept sentiment towards these countries’ currencies positive,” he said.
South Africa’s currency gained 0.5 percent to 10.1834 per dollar as of 9:41 a.m. in Johannesburg, bringing its gain in the past week to 0.9 percent, the first advance since Aug. 9. Yields on 10.5 percent bonds due December 2026 climbed two basis points, or 0.02 percentage point, to 8.54 percent for a gain of eight basis points this week.
Gross reserves in Africa’s biggest economy climbed to $47.95 billion from $47.3 billion in July, the Pretoria-based Reserve Bank said on its website today. The median estimate in a Bloomberg survey of seven analysts was $47.7 billion. Net reserves increased 1.1 percent to $45.9 billion.
The central bank has been accumulating foreign currency to to help protect against swings in the rand, the most volatile of 16 major currencies tracked by Bloomberg. The rand has dropped 17 percent against the dollar this year. The spot gold price rose 5.3 percent last month, according to data compiled by Bloomberg.
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