South African Rand, Bonds Gain as Current-Account Gap Narrows

The rand gained for a third day as South Africa’s current-account gap narrowed to the lowest in seven years and on optimism the worst of Japan’s nuclear crisis may be over, boosting investor demand for high-yielding assets.

The currency of Africa’s biggest economy advanced as much as 0.8 percent to 6.8983 per dollar, and traded 0.7 percent stronger at 6.9047 at 4:52 p.m. in Johannesburg, the best performer among more than 20 emerging-market currencies monitored by Bloomberg. The rand has climbed 2.8 percent since March 18. Against the euro, the rand appreciated 0.9 percent to 9.8051.

South Africa’s shortfall in the current account, the broadest measure of trade in goods and services, shrank as miners boosted exports of platinum and coal while imports fell. The MSCI Emerging Markets Index rose for a third day after a U.S. Nuclear Regulatory Commission official said the situation at the earthquake and tsunami-damaged Fukushima Dai-Ichi nuclear reactors “is on the verge of stabilizing.”

“The rand has been strengthening as a result of better news out of Japan,” Chris Becker, an analyst at Johannesburg-based Econometrix Treasury Management, which advises clients on currency transactions, said by phone. “The current-account data supported” the currency’s advance.

Export Volumes

The current-account gap fell to 0.6 percent of gross domestic product from 3.1 percent in the previous three months, the Reserve Bank said in its quarterly bulletin released in Pretoria. The median estimate of 19 economists surveyed by Bloomberg was for a deficit of 2.7 percent of GDP. The shortfall eased to an annualized 17 billion rand ($2.5 billion) in the fourth quarter from 83.2 billion rand in the previous three months.

While growth in export volumes slowed to 3.4 percent in the fourth quarter from 6.7 percent in the previous three months, its value climbed 5.5 percent to an annualized 616.7 billion rand in the same period, the bank said. Import volumes contracted for the first time in more than a year in the fourth quarter, dropping by 2.2 percent, as companies held back on investment because of subdued demand in the economy, it said.

“A staggeringly good current account deficit print will do much to boost the rand for now,” Razia Khan, head of Africa economic research at Standard Chartered Plc in London, said in a note to clients.

Japanese Prime Minister Naoto Kan said there is “light at the end of the tunnel” in the battle to avert a meltdown at the crippled nuclear power plant. Western intervention in Libya also boosted higher-yielding assets on speculation it will help return stability to the country. South Africa’s benchmark stock index advanced as much as 1.4 percent.

‘Risk-On’ Day

“A risk-on frame of mind seems to have returned,” Michael Keenan, a Johannesburg-based analyst at Standard Bank said in an e-mailed note. “Risky assets such as equities are rallying.”

Government bonds gained after the Reserve Bank reported that consumer spending, which accounts for two-thirds of demand in the country, eased in the fourth quarter, fuelling speculation the central bank will leave its benchmark interest rate at a 30-year low of 5.5 percent until 2012.

The 13.5 percent government bond due September 2015 rose the most in almost two weeks, adding 26 cents to 120.99 rand, driving the yield down 6.4 basis points, or 0.06 percentage point, to 7.844 percent.

“We remain confident that interest rates will stay at current levels until early in 2012,” analysts led by Johannesburg-based Johan Botha at Standard Bank said in an e-mailed note.

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