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Johannesburg - The rand gained the most among emerging-market currencies and bonds advanced, driving yields to seven-month lows, as investors bought the nation’s stocks and bonds on expectations developed-nation central banks will extend monetary stimulus.
The rand advanced 0.8% to R14.3322/$ by 10:37 in Johannesburg, erasing losses incurred following the UK referendum on European Union and heading for the strongest level in 10 weeks.
Against the euro, the currency strengthened for a fourth day, gaining 0.3% to R15.9341/$, the strongest level on a closing basis since December 8. Yields on benchmark government rand bonds due in December 2026 dropped one basis point to 8.61%, the lowest since December 3, after falling 10 points on Monday.
“The bias remains for rand gains as global markets gain, Brexit fears subside and as huge capital inflows continue,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in a note. “The rand’s out-performance, however, suggests some caution.
"We suspect the market will be cautious in pushing the rand too much further ahead of other risk currencies.”
Offshore investors were net buyers of South African bonds for the 17th day on Monday, the longest streak in at least six years, bringing inflows this month to R8.6bn. Foreigners also bought R3.25bn of South African stocks, stretching inflows to 27 straight days, the most consecutive days of inflows since August 1999.
Global equities are almost back to where they were when the UK voted to leave the European Union. Japanese Prime Minister Shinzo Abe said he would order ministers on Tuesday to begin compiling a stimulus package one of his advisers has recommended should be ¥20trn in the current fiscal year.
The Bank of England is forecast to cut interest rates on Thursday and traders are betting there will be further monetary easing in the euro area this year.
