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Rand Gains First Day in Three as Yields Fall on Euro Area Growth

The rand gained for the first time in three days after data showed the economy of the euro area, South Africa’s biggest regional trading partner, emerged from a record-long recession in the second quarter. Bond yields fell.

Gross domestic product in the 17-nation euro area rose 0.3 percent from April to June, exceeding the median estimate of 0.2 percent growth in a Bloomberg survey and ending six straight quarters of contraction. South African retail sales rose at the slowest pace in eight months in June, a report showed today, undermining growth in Africa’s biggest economy.

“The euro-area growth data should certainly be construed in a positive light,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said by phone. “It will be supportive of risk appetite in the short term,” though sluggish growth will limit rand gains in the longer term, he said.

The rand appreciated 0.6 percent to 9.9322 per dollar as of 4:15 p.m. in Johannesburg. Yields on benchmark 10.5 percent bonds due December 2026 dropped four basis points, or 0.04 percentage point, to 8.27 percent.

Germany and France, the euro area’s two largest economies, both showed faster-than-projected expansions in the quarter. The euro area buys about 25 percent of South Africa’s exports, according to government data.

South African retail sales rose 1.9 percent from a year earlier, compared with 6.2 percent in May. The median estimate of 14 economists in a Bloomberg survey was 3 percent. The rate of manufacturing growth declined in June and mining output contracted, reports showed last week. The central bank left the repurchase rate at a three-decade low of 5 percent to support an economy forecast to expand 2 percent this year, the slowest pace since a 2009 recession.

“With growth still well below trend” and the inflation rate falling, “it seems highly unlikely that the Reserve Bank will be in a hurry to hike,” Carmen Nel, a Cape Town-based analyst at Rand Merchant Bank, said in e-mailed comments.

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