Rand Posts Weekly Gain After Biggest Trade Surplus in 4 Years

  • Two-day gain sparked by central bank ramping up rate increases
  • Potential for `sharp' rebound toward fair value, Standard says

The rand gained to the strongest level in three weeks against the dollar to trim a third straight month of losses after South Africa’s central bank ramped up the magnitude of interest-rate increases and the nation posted the biggest trade surplus in four years.

The currency advanced 1.3 percent to 15.9887 per dollar by 4:42 p.m. in Johannesburg, trading below the 16 level for the first time since Jan. 6. That marked the second day of gains after the Reserve Bank lifted the benchmark rate by half a percentage point to 6.75 percent on Thursday, diverging from its gradual approach of tightening in moves of 25 basis points at a time. Yields on government bonds due December 2026 declined 27 basis points to 9.21 percent, the lowest since Dec. 9.

“The fact that you just listed a positive trading number has had an impact on the rand,” Piotr Matys, an emerging-market strategist at Rabobank, said by phone from London. “The currency has suffered a few losses and needs every positive news.”

South Africa posted its biggest trade surplus in four years in December as factories cut back on imports of machinery and equipment during the year-end holiday period. The trade surplus widened to 8.2 billion rand ($500 million) from a revised 0.7 billion rand in November, the Pretoria-based South African Revenue Service said in an e-mailed statement on Friday. The median of 13 economist estimates compiled by Bloomberg was for a surplus of 4.9 billion rand.

Further policy easing by Japan also supported the rand, Matys said. Bank of Japan Governor Haruhiko Kuroda sprung a surprise on investors Friday, adopting a negative interest-rate strategy to spur banks to lend in the face of a weakening economy.

Flash Crash

The rand advanced 3 percent this week, the most since the five days ending Dec. 18. That pared its decline in January to 3.2 percent. The currency breached a technical resistance barrier at the 16.35 area, returning to levels it last traded at before a so-called “flash crash” on Jan. 11, when it lost 9 percent in thin Asian trading. It’s still weaker than before President Jacob Zuma fired Finance Minister Nhlanhla Nene on Dec. 9, replacing him with a little-known lawmaker before rescinding that decision and re-appointing Pravin Gordhan.

“This is a minor psychological success for the market but remember that we were trading back at 14.50-60 before the change in finance ministers in December,” John Cairns, a Johannesburg-based currency strategist at Rand Merchant Bank, said in a note.

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