The rand gained the most against the euro in two months after the European Central Bank unexpectedly cut its benchmark interest rate to a record, spurring investors to higher-yielding emerging-market assets.
The ECB lowered the main refinancing rate to 0.25 percent in a bid to stave off deflation after prices in the 17-member currency zone slowed to 0.7 percent in October, lower than the bank’s 2 percent target. All except two of 24 major emerging-market currencies tracked by Bloomberg gained against the euro.
“The cut is more accommodative and means more liquidity in the system,” Vivienne Taberer, who helps oversee the equivalent of $14 billion in fixed-income assets at Cape Town-based Investec Asset Management, said by phone. “For risk assets, emerging-market currencies and bonds, it has given a little more risk on.”
The rand gained as much as 1.7 percent to 13.6358 per euro and traded at 13.6448 as of 3:43 p.m. in Johannesburg. A close at that level will be the best one-day gain since Sept. 6. The rand fluctuated against the dollar to trade 0.3 percent stronger at 10.2402 after data showing growth in the U.S. economy was faster than expected. Yields on South African government benchmark bonds due December 2026 fell 12 basis points, or 0.12 percentage point, 8.08 percent.
South African factory output fell for the first time in six months, declining 3.3 percent from a year ago and missing the median estimate in a survey of 15 analysts, according to Statistics South Africa. Mining production rose 0.6 percent in September, the statistics agency said today. The country’s gross foreign exchange and gold reserves dropped to $49.71 billion in October from $50.02 billion the month before, the central bank said today.
The U.S. economy expanded at a 2.8 percent annualized rate in the third quarter, compared with a 2.5 percent increase in the previous three months and beating estimates for a 2 percent advance. Fewer Americans also filed applications for unemployment benefits last week, indicating firings haven’t picked up following the partial government shutdown.