Rand Gains First Day in Three as Stocks, Metals Prices Advance

The rand gained for the first time in three days as stocks and metals prices rose on speculation a global economic recovery is gathering momentum, boosting the prospects for South Africa’s exports.

The currency strengthened as much as 0.9 percent to the strongest level since Feb. 6, and gained 0.6 percent to 8.8614 per dollar as of 4:26 p.m. in Johannesburg. The currency slumped to the lowest level in more than a week yesterday as North Korea tested a nuclear weapon, prompting investors to shun riskier assets. Yields on benchmark 10.5 percent bonds due December 2026 dropped four basis points, or 0.04 percentage point, to 7.29 percent.

Industrial production in the euro area climbed more than forecast in December, a report showed today. The euro appreciated for a third day against the dollar and prices of metals including copper and platinum rose. Commodities accounted for 53 percent of South Africa’s export earnings in 2012, according to government data.

“Global equity markets continue to surge,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “Risk-off from the North Korea nuclear tests rapidly faded and attention switched to the hopes for the global economy.”

The S&P 500 Index climbed to its highest level since 2007 yesterday and the MSCI Emerging-Markets stock gauge gained the most in two weeks today. South Africa’s benchmark stock index rose for the first time in three days as prices of metals including platinum advanced. Copper for three-month delivery added as much as 0.5 percent.

Foreign Purchases

Foreign investors bought a net 2.1 billion rand ($237 million) of South African stocks and bonds yesterday, bringing foreign flows into the nation’s equity and debt market this year to 11.6 billion rand, according to Bloomberg calculations from JSE Ltd. data.

South Africa’s rand is the “most undervalued” out of 34 currencies based on three measures used to determine a currency’s “fair value,” Daragh Maher, a currency strategist at HSBC Holdings Plc in London, said in a research report today. The rand, together with the Hungarian forint and the Polish zloty, were the least likely to be targeted by central banks in trying to drive currencies weaker, he wrote.

“These are the currencies you would want to buy if you believed the currency war were to intensify further,” Maher wrote.

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