Rand on the charge, tops EM currency gains – breaches 15/dollar

By Robert Brand

(Bloomberg) – South Africa’s rand headed for its biggest gain against the dollar in more than two months as a combination of positive local economic data and a global risk-off mood enticed investors to the country’s high-yielding bonds.

With a lull in the US-China trade war reigniting the hunt for yield, foreign investors were net buyers of South African bonds on Tuesday for the third day running, according to JSE Ltd. data. Yields on benchmark 2026 government securities have dropped 13 basis points this week to 8.09%, still the highest among major emerging markets after Turkey and Lebanon.

Even though the world’s two biggest economies don’t appear to be moving closer to a trade deal, “there has been a sense of stabilisation that could be supportive for EMEA high-yielders,” Credit Agricole SA strategists led by Paris-based Sebastien Barbe wrote in a note. The rand is “also benefiting from a better local environment,” though any rebound is likely to be temporary, they said.

The rand climbed 1.6% to 14.8622 per dollar by 2:11pm in Johannesburg, leading emerging-market currency gains and heading for its strongest close since Aug. 2.

Foreign investors bought a net R2.5bn ($168m) of South African bonds on Tuesday, bringing inflows in the past three trading days to R6.8bn. South Africa’s economy expanded an annualised 3.1% in the second quarter, dodging a recession after it contracted by the same amount in the previous three months.