Rand Gains as U.S. Growth Boosts South Africa’s Export Prospects

The rand gained for a second day after a report showed the U.S. economy grew more than forecast in the third quarter, boosting South Africa’s export prospects.

The currency strengthened 0.9 percent against the dollar as of 4 p.m. in Johannesburg for a 0.1 percent weekly gain, the third consecutive advance. Yields on 6.75 percent bonds due 2021 rose one basis point to 6.69 percent, for an increase of seven basis points this week.

Gross domestic product in the U.S., South Africa’s second-biggest single-country trading partner this year after China, rose 2 percent after climbing 1.3 percent in the prior quarter. The median estimate of economists in a Bloomberg survey was for growth of 1.8 percent. Commodities rallied as industrial metals including copper gained. Metals and other commodities account for 45 percent of South Africa’s exports, according to government data.

“The global backdrop picked up somewhat as data out of the U.S. again surprised on the upside,” John Cairns and Josina Solomons, currency strategists at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “A positive growth number should result in the rand ending the week on a firm footing.”

The Standard & Poor’s GSCI Index of raw materials gained, rebounding from a 12-week low.

Deficit Widens

Bonds fell after Fitch Ratings said the government’s failure to meet fiscal targets was eroding its rating strengths. Yields pared gains after the U.S. growth data boosted investor appetite for riskier assets.

South Africa’s fiscal deficit will widen as slowing growth curbs tax revenue, Finance Minister Pravin Gordhan said in his mid-term budget yesterday. Moody’s Investors Service and Standard & Poor’s cut the nation’s credit ratings in the past month, citing concern about deteriorating government finances. Fitch, which has a negative outlook on South Africa, said it will complete a review early next year.

The mid-term budget “shows evidence of further weakening in the country’s public finances,” Fitch analysts Richard Fox and Carmen Altenkirch said in an e-mailed statement today. “Failure to deliver projected fiscal consolidation continues to erode one of the sovereign’s key rating strengths compared with its peers.”

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