South Africa's Rand Posts Weekly Advance as Commodities Rally

By Garth Theunissen

Aug. 22 (Bloomberg) -- South Africa's rand snapped two weeks of losses against the dollar as gains in gold and platinum boosted revenue prospects for the world's biggest producer of precious metals.

The rand was the best performer of the 16 major currencies monitored by Bloomberg in the past five days as gold headed for its biggest weekly rally in more than two years and platinum ended a five-week losing run. The metals rose with other commodities as a weaker dollar and higher oil prices spurred demand for alternative investments and hedges against inflation.

``Commodities are a strong theme for the rand at the moment,'' said Kay Muller, a currency researcher at Rand Merchant Bank in Johannesburg. ``Strong gains in oil and a weaker dollar are fueling gold and platinum, which is positive for the rand.''

The rand climbed 2.6 percent in the week to 7.6692 per dollar by 3:36 p.m. in Johannesburg, from 7.8707 on Aug. 15. It advanced 1.7 percent from Aug. 15 to 11.3752 per euro.

``Positive momentum has returned to commodities, which along with a dollar correction, is keeping the rand buoyant,'' said Tolga Ediz an emerging-markets currency strategist in London at Lehman Brothers Holdings Inc. ``There's still enough risk appetite to help high-yielding currencies.''

Commodities are poised to advance in the week as the dollar traded near the lowest level in more than two weeks against the yen and was set to drop in the week versus the euro.

Gold climbed 5 percent to $826.60 an ounce, the biggest weekly advance since July 2006. Platinum rose 2.5 percent from Aug. 15 to $1,417.70 an ounce. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with the metals' prices.

Crude oil rose 5.3 percent this week to $119.80 a barrel, set for its biggest weekly increase in almost three months.

Government bonds fell this week, with the yield on South Africa's benchmark 13.5 percent security due September 2015 adding 13 basis points to 9.27 percent. Yields move inversely to bond prices.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net