The rand gained for a second day, paring its weekly decline, as commodity prices rallied after concern waned the U.S. Federal Reserve may curtail stimulus measures that have boosted demand for high-yielding assets.
South Africa’s currency appreciated 0.4 percent to 8.8618 per dollar by 3:55 a.m. in Johannesburg, cutting its loss this week to less than 0.1 percent. Yields on benchmark 10.5 percent bonds due December 2026 slid two basis points, or 0.02 percentage point, 7.23 percent. The yield dropped nine basis points this week.
Fed Chairman Ben S. Bernanke minimized concerns that the central bank’s easy monetary policy has spawned economically risky asset bubbles. His comments were published after several U.S. Federal Reserve policy makers said the central bank should be ready to vary the pace of its $85 billion of monthly bond purchases, according to minutes of their meeting released yesterday. The Standard & Poor’s GSCI index of raw materials advanced.
“The effects of the Fed minutes that appeared to spook investors yesterday are reversing to some extent today with all the commodity currencies making back some ground,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, said in e-mailed comments. “The implication for the rand is that there has been an improvement in sentiment.”
The GSCI gauge gained as much as 0.7 percent before trading 0.3 percent higher. Metals and other mining commodities accounted for 53 percent of South Africa’s exports in 2012, according to government data.
Bernanke brushed off the risks of asset bubbles in response to a presentation on the subject from a group of investors and dealers this month, according to three people with knowledge of the discussions. Among the concerns raised, according to one person, were rising farmland prices and the growth of mortgage real estate investment trusts. Falling yields on speculative-grade bonds also were mentioned as a potential concern, two people said.
The rand stayed stronger after German business confidence increased to a 10-month high in February, adding to signs that Europe’s largest economy is gathering strength. The euro area is South Africa’s biggest trading partner, buying about 24 percent of the nation’s exports, according to government data.