The rand gained, rebounding from a five-week low, after Federal Reserve Chairman Ben Bernanke said he wouldn’t rule out further bond purchases to boost growth and reduce unemployment, which he called a “grave concern.”
South Africa’s currency advanced 0.5 percent to 8.4302 per dollar as of 4:33 p.m. in Johannesburg, paring its decline this month to 2 percent. The rand initially reversed gains after Bernanke’s prepared speech was published, before recovering. The yield on 6.75 percent bonds due 2021 climbed two basis points, or 0.2 percentage point, to 6.74 percent, for an 8 basis point advance in the month.
Bernanke’s speech to central bankers and economists at an annual forum in Jackson Hole, Wyoming, comes two weeks before he leads a meeting of the Federal Open Market Committee to decide whether an expansion of the Fed’s record stimulus is needed to spur growth. His address in 2010 preceded a second round of quantitative easing, boosting demand for higher-yielding assets including commodities and emerging-market bonds. Raw materials account for 45 percent of South Africa’s exports, according to government data for 2011.
“The initial reaction was a knee-jerk one,” Ian Cruickshanks, head of treasury strategic research at Johannesburg-based Nedbank Group Ltd., said by phone. “Investor hopes for monetary easing haven’t come about, but they are likely to in the future. He said there’s no reason why they shouldn’t use it if they need to spur economic growth.”
The Dow Jones Industrial Average in the U.S. traded 0.7 percent higher. South Africa’s FTSE/JSE Africa All Share Index added 0.2 percent, extending gains this month to 2.3 percent.