Rand Declines 1st Day in Three as Investors Gauge Gains Overdone

The rand declined for the first time in three days as investors decided the currency’s gain last week, the biggest in almost four months, was overdone. Bonds fell.

South Africa’s currency weakened 0.9 percent to 8.9229 per dollar by 3:55 p.m. in Johannesburg, paring last week’s 1.2 percent climb, the first five-day advance since the week ended Dec. 28. Yields on 10.5 percent bonds due Dec. 2026 rose five basis points, or 0.05 percentage point, to 7.35 percent, after falling 18 basis points last week.

The rand soared 1.3 percent on Feb. 1, its biggest daily rise since Oct. 9, after U.S. jobs data added to evidence of a recovery in the world’s biggest economy, boosting South Africa’s export prospects. The recovery isn’t justified given South Africa’s economic outlook, said Brigid Taylor, head of institutional sales at Nedbank Group Ltd. in Johannesburg.

“The rand is still firmly in a weaker bias,” she said in e-mailed comments today. “The currency, bonds and equities, while having rallied last week, highlighted that investors are becoming more cautious toward South Africa again.”

South Africa’s benchmark stock index declined for the first time in three days. The index rose to a record on Jan. 29. Data last week showed South Africa posted a budget surplus of 20.5 billion rand ($2.3 billion) in December, less than the 21 billion rand in the corresponding month in 2011, while the nation’s trade deficit for 2012 widened more than sixfold.

“The South African government is not making the kind of progress investors would like to see in rebalancing the budget,” Quinten Bertenshaw, an analyst at ETM Analytics in Johannesburg, wrote in comments e-mailed to clients today. “The underlying bias remains firmly in favor of further dollar gains and so one should treat the most recent dollar-rand retreat with some skepticism.”

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