Rand Gains Second Day as Japan’s Policy Shift Boosts Bond Demand

The rand gained for a second day after the Bank of Japan added to developed-nation stimulus measures that have boosted demand for higher-yielding assets and helped drive South African bond yields to record lows.

South Africa’s currency advanced as much as 0.6 percent before paring gains after Gwede Mantashe, secretary-general of the ruling African National Congress, called for greater state control of mining. The rand traded less than 0.1 percent stronger at 8.8556 as of 3:22 p.m. in Johannesburg. Yields on 6.75 percent bonds due March 2021 dropped one basis point, or 0.01 percentage point, to 6.39 percent.

The Bank of Japan set a 2 percent inflation target and said it will shift to Federal Reserve-style open-ended asset purchases in its strongest commitment yet to ending two decades of deflation. Yields on South African bonds fell to record lows in January as monetary stimulus from central banks in the U.S., European Union and Japan boosted demand for riskier assets.

“The outlook for local bonds remains bullish as major central banks continue to fire up the printing presses,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, said in e-mailed comments. “The significance of this for a country like South Africa is that it confirms the yen as a funding currency. All three major central banks remain ultra-accommodative and will ensure that funding continues to flow towards emerging markets.”

Foreign investors bought a net 2.8 billion rand ($317 million) of South African bonds yesterday, according to JSE Ltd. data. Yields on 2021 bonds fell to a record 6.29 percent on Jan. 9.

The Standard & Poor’s GSCI index of raw materials gained as much as 0.6 percent as the prices of metals including copper and platinum rose. Commodities accounted for 61 percent of South Africa’s exports in the first 11 months of 2012, according to government data.

Before it's here, it's on the Bloomberg Terminal.