The rand rebounded from its weakest level in almost four years against the dollar as investors bet the retreat, the worst among emerging-market currencies this year, had gone too far.
South Africa’s currency advanced 0.5 percent to 9.0597 a dollar as of 3:24 p.m. in Johannesburg. Yields on benchmark 10.5 percent bonds due December 2026 dropped one basis point, or 0.01 percentage point, to 7.47 percent after climbing nine basis points yesterday to the highest since Dec. 5.
The rand slumped as much as 2.4 percent yesterday to 9.1604 per dollar, its weakest level since April 2009, as foreign investors reduced holdings of South African assets on concern labor unrest and mining production cuts will weigh on economic growth and the nation’s current-account deficit. The depreciation may have been too steep, technical indicators signaled today.
“The move yesterday was perhaps a little dramatic and a touch overdone,” George Glynos, a Johannesburg-based analyst at ETM Analytics, said in e-mailed comments. “With the rand such a massive underperformer amongst emerging-market currencies, one feels there is perhaps scope for a recovery.”
A stochastic oscillator for the rand versus the dollar was at 8.7 today, below the 30 threshold that signals the currency may have depreciated too quickly and is poised for a rebound. The measure, which tracks the price of a currency relative to its highs and lows during a particular period, has been below 30 for the past 11 days.
Foreign investors were net sellers of 1.2 billion rand ($133 million) of South African bonds yesterday, paring net purchases this month to 1.3 billion rand, according to JSE Ltd. data.
Most major emerging-market currencies declined yesterday after U.S. durable-goods orders rose more than economists’ expectations in December, fueling speculation the Federal Reserve will be able to end its monetary stimulus earlier than anticipated.
“Global markets have stabilised after some overnight volatility,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “Exporters will be looking to take advantage of these attractive levels.”
South Africa’s Treasury sold 2.1 billion rand of bonds maturing in 2026, 2031 and 2036 at its weekly auction today, with investors bidding for 3.2 times the amount on offer, according to Reserve Bank data.