The rand advanced to its strongest level in more than two weeks against the dollar after gold climbed to a record yesterday and the deadlock among American lawmakers over the debt ceiling spurred demand for alternatives to the U.S. currency.
South Africa’s rand appreciated as much as 1.4 percent to 6.6718 per dollar, the strongest since July 8. It traded 1.1 percent higher at 6.6911 at 4:06 p.m. in Johannesburg, a sixth day of gains. The rand rose less 0.4 percent to 9.6857 per euro.
Gold traded within less than 1 percent of an all-time high after President Barack Obama warned yesterday of a “deep economic crisis” without a compromise to avert an Aug. 2 default. The dollar fell against all of its most-traded peers.
“Market fears over the U.S. debt situation are impacting more on the dollar than risky assets,” John Cairns and Nema Ramkhelawan-Bhana, currency strategists at Rand Merchant Bank in Johannesburg, said in a research note. “Global markets remain jittery.”
Stocks fell today in Europe and early U.S. trading, while gold traded at $1,613.30 an ounce, after climbing to a record $1,626.30 yesterday. Gold and platinum account for 20 percent of South Africa’s export earnings, according to government data.
South Africa’s relatively conservative fiscal and monetary policies are attracting investors to the country’s currency, Tradition Analytics researchers led by Johannesburg-based Quinten Bertenshaw said in a research note.
“The dollar index is set to retain a bearish bias for now and those currencies which offer reasonable returns without the prospect of near-term fiscal trouble are likely to enjoy some support,” Tradition said. “Investors are choosing not to look at the dollar as the safe haven it was a month or two ago.”
The Reserve Bank has kept its benchmark interest rate at 5.5 percent since November, compared with near-zero rates in the U.S. and Japan. South Africa’s budget deficit will be unchanged at 5.3 percent of gross domestic product in the year through March 2012, Finance Minister Pravin Gordhan said in February.
Foreign investors bought a net 669 million rand ($100 million) of South African bonds yesterday, adding to 1.37 billion rand of debt purchases last week, according to JSE Ltd., which operates South Africa’s stock and bond markets.
Bonds declined for a third day. The 10.5 percent notes due 2026 shed 10 cents to 116.74 rand, boosting the yield one basis point, or 0.01 percentage point, to 8.53 percent.