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South Africa Rand Gains on China, U.S. Manufacturing Rise

March 1 (Bloomberg) -- The rand gained against the dollar and bond yields rose to the highest in a week after a gauge of manufacturing soared to a two-year high, adding to signs of a revival in Africa’s biggest economy.

South Africa’s currency climbed 0.4 percent to 7.4773 per dollar as of 3:37 p.m. in Johannesburg, the second-biggest gain after Mexico’s peso out of the 16 most-traded currencies monitored by Bloomberg. The yield on the nation’s 77 billion rand ($7.5 billion) of 6.75 percent bonds due 2021 rose 2.5 basis points, or 0.025 percentage point, to 7.87 percent, the highest since Feb. 23.

South Africa’s purchasing managers’ index rose to 57.9 in February, from 53.2 the month before, beating the 52.3 media estimate of economists in a Bloomberg survey. Manufacturing, which accounts for 15 percent of the nation’s gross domestic product, expanded in the last three months of 2011 after contracting in the second and third quarters, lifting economic growth from close to a two-year low.

“It was a lot better than expected, and that is quite positive” for the rand, Ian Cruickshanks, head of treasury strategic research at Johannesburg-based Nedbank Group Ltd., said by phone. “Risk appetite is still there, and that is going to continue to buoy emerging-market currencies.”

China’s manufacturing improved for a third month in February and data later today may show U.S. factory activity climbed to an eight-month high, brightening the outlook for global growth.

The number of Americans filing first-time claims for unemployment insurance payments fell to a level matching a four-year low, a report showed today, more evidence the labor market is healing. China and the U.S. buy 19 percent of South Africa’s exports, according to government data for 2011.

‘Rand Resilience’

“The outlook for the U.S. economy continues to improve,” George Glynos, an economist at Johannesburg-based ETM Analytics, wrote in e-mailed comments today. “Rand resilience may be a feature for a while to come.”

The Institute for Supply Management’s factory index probably rose to 54.5 in February from 54.1 in January, according to the median estimate of economists surveyed by Bloomberg News before the data today. Readings above 50 signal growth. A separate report today may show consumer purchases in the world’s largest economy increased 0.4 percent in January.

China’s purchasing managers’ index increased to 51.0 last month from 50.5 in January, the nation’s statistics bureau and logistics federation said in a statement today. China is South Africa’s biggest export destination.

South Africa’s $1.5 billion of 4.665 percent bonds due 2024 gained, driving the yield down four basis points to 4.15 percent, the lowest since the bonds were first sold on Jan. 17. The premium investors demand to hold the debt rather than U.S. Treasuries narrowed six basis points to 216 basis points, the lowest on record.

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

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

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