The rand rose to a three-week high, set for its best weekly gain since June, and yields fell as speculation central banks will do more to bolster growth fueled demand for high-yielding assets.
South Africa’s currency advanced as much as 1.5 percent to 8.1842 per dollar, the strongest since Aug. 15. It traded at 8.2029 by 3:53 p.m. in Johannesburg, bringing its gain this week to 2.3 percent, the most since the five days ending June 29. Yields on benchmark 6.75 percent bonds due March 2021 dropped six basis points, or 0.06 percentage point, to 6.59 percent.
ECB President Mario Draghi yesterday said policy makers agreed to an unlimited bond-purchase program. U.S. employers added fewer jobs in August than forecast, increasing speculation the Federal Reserve will add to monetary stimulus. Demand for South African bonds, which dropped after 44 people were killed last month in labor protests at Lonmin Plc’s platinum mine in Marikana, is increasing before South Africa’s inclusion next month in Citigroup’s World Government Bond Index.
“All this news has seen risk assets rally,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, wrote in e-mailed comments. “In the short term, there should be a continued allocation of capital to riskier bonds.”
Foreign investors bought a net 4 billion rand ($490 million) of South African bonds in the first four days of this week, according to JSE Ltd. data. Foreigners have bought 72 billion rand of the nation’s bonds this year, more than in any other year since Bloomberg started compiling the data in 1996.
“Foreign investors have been net buyers of our bonds for each of the last nine days,” John Cairns and Josina Solomons, strategists at Rand Merchant Bank in Johannesburg, write in e-mailed comments. “No wonder the tone of the rand has switched to positive.”