The rand gained for the first time in four days after central bankers of the euro area and the U.K. signaled they will maintain monetary stimulus, boosting investor appetite for higher-yielding assets.
With European Central Bank officials leaving their main refinancing rate at 0.5 percent today, President Mario Draghi fleshed out their outlook for monetary policy after investors pushed up long-term bond yields, threatening economic growth in South Africa’s biggest regional trading partner. The statement came on the same day that the Bank of England tried to manage investor expectations in Mark Carney’s first week as governor.
“We had a double whammy, with the BoE setting the ball rolling and the ECB with a statement that surprised the market,” Gareth Brickman, a market analyst at ETM Analytics in Johannesburg, said by phone. “We’re seeing these central banks reacting to the Fed talk of tapering. The rand is outperforming.”
South Africa’s currency gained 0.8 percent to 10.0166 per dollar as of 4:20 p.m. in Johannesburg, the best performance out of 24 emerging-market currencies monitored by Bloomberg. It surged 1.6 percent against the euro to 12.9174. Yields on benchmark 10.5 percent bonds due December 2026 dropped seven basis points, or 0.07 percentage point, to 7.90 percent.
Draghi said the ECB will keep interest rates low for an “extended period” as he tries to restrain market borrowing costs. Emerging-market stocks rose for the first time in three days, while the euro fell against 14 out of its 16 most-traded peers after Draghi’s comments.
The remarks followed a surge in Portugal’s 10-year bond yield above 8 percent for the first time since November and after the Federal Reserve Chairman Ben S. Bernanke rattled investors on June 19, saying the central bank may start decreasing bond buying later this year, scaling back a program that pumped cheap money into assets around the world, including in emerging markets.