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Johannesburg - South Africa’s rand surged more
than 2% against the dollar on Wednesday, touching a near-five month
high in line with a stronger euro as hopes of a resolution to Greece’s debt
crisis helped to lift risk appetite globally.
Government bonds rallied in tandem, supported by continued demand
from foreign investors looking for yield in emerging markets.
The rand soared to a session high of 7.6575/dollar, its strongest
level since Sept. 20 last year, and was trading at 7.66 by 16:03 GMT, up 2.05% on the day.
It was the second best performer among 20 emerging market
currencies monitored by Reuters, after the Hungarian forint.
“There is no fundamental reason ... just a continued correction
from the steep sell-off seen last year,” Christopher Shiells, an analyst at
Informa Global Markets, said.
The rand has gained more than five percent against the greenback
since the start of this year, partly reversing its nearly 23 percent plunge on
the back of global risk aversion last year.
“A lot of the gains are related to euro/rand breaking below 10.200
and dollar/rand 7.7500, which triggered stops,” Shiells said of Wednesday’s
move.
On the debt market, the yield on the three-year bond closed 5.5
basis points lower at 6.4% compared with Tuesday, while the yield for the
bond due in 2026 fell by six basis points to 8.135%.
“From what I can gather it’s the strength of the rand ... and
apparently foreigners have been buying local bonds quite a bit this week,” Cadiz
Asset Management fixed income dealer Sulette Wentzel said.
“It’s because of the attractive yield, if you look at the U.S.
interest rates there’s hardly any earnings there, so they’ve just come to
emerging markets where they get a much better yield on their investment.”
Foreigners bought a net R4.1bn worth of
South African bonds last week, data from the JSE exchange showed.