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Rand Gains, Yields Fall as Euro Debt Optimism Boosts Risk Demand

The rand gained for the first time in three days and yields fell to the lowest in a more than a week on speculation euro-area leaders will make progress on Greece’s debt crisis, stoking demand for riskier assets.

South Africa’s currency advanced as much as 1.3 percent, and traded 1.1 percent stronger at 8.2395 per dollar as of 3 p.m. in Johannesburg. Yields on the nation’s 6.75 percent bonds due 2021 dropped nine basis points, or 0.09 percentage point, to 6.80 percent, the lowest since Aug. 10.

International creditors may adjust the interest on Greek bailout loans, Norbert Barthle, a senior lawmaker of German Chancellor Angela Merkel’s party, was quoted as saying by the Passauer Neue Presse. Luxembourg Prime Minister Jean-Claude Juncker, the head of the euro group of finance ministers, visits Greece tomorrow. German Chancellor Angela Merkel and French President Francois Hollande meet in Berlin on Aug. 23 and both are set to talk separately with Greece’s Prime Minister Antonis Samaras this week.

“An improvement in global risk appetite has supported demand for emerging market commodity-based currencies, providing support for the rand,” Ian Cruickshanks, head of treasury strategic research at Johannesburg-based Nedbank Group Ltd., and colleagues wrote in a report today.

Foreign investors were net buyers of 1.1 billion rand ($133 million) of South African bonds yesterday, after selling 3.2 billion last week, according to JSE Ltd., which runs the nation’s bond exchange.

Police Shooting

The rand had declined for two days after police fired on striking workers at a Lonmin Plc mine on Aug. 16, killing 34. Investors sold a net 2.1 billion rand of the nation’s bonds on Aug. 17, the most since July 27.

“The worst effects of the mine shootings should now be behind us,” John Cairns and Josina Solomons, currency strategists at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “The rand should be able to start edging stronger again: we saw the unit finally top out yesterday and its compatriot currencies are making slow but steady gains.”

The Standard & Poor’s GSCI Index of raw materials climbed to the highest in more than three months as prices of metal including copper rallied. South Africa’s benchmark stock index gained for the first time in three days, led by commodity exporters including BHP Billiton Ltd. and Anglo American Plc.

Metals and other commodities account for 45 percent of South Africa’s exports, according to government data for 2011. The currencies of other commodity-exporting nations including New Zealand, Brazil and Canada also gained.

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