Rand Logs Biggest Weekly Gain in a Month as Stock Markets Rally

By Garth Theunissen

Nov. 29 (Bloomberg) -- South Africa’s rand posted its biggest weekly gain against the dollar in a month as stocks rallied around the world on speculation government efforts to shore up the economy may avert the worst of the credit crunch.

The rand gained with higher-yielding assets as the U.S., Europe and China this week announced financing plans worth a combined $1 trillion to prevent a global recession. It strengthened after the nation’s stock market logged its first five-day advance this month as record inflation in Africa’s biggest economy eased.

“Global factors are still the dominant factor for the rand,” said Ulrich Leuchtmann, head of foreign-exchange research in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “The rand is highly correlated with global risk sentiment, which has abated from extremely high levels partly due to measures aimed at stabilizing the global banking crisis.”

The rand advanced 3.8 percent this past week to 10.0800 per dollar by 5:30 p.m. in Johannesburg yesterday. It climbed 3.4 percent to 12.8007 per euro. In the month it fell 2.8 percent versus the dollar and 2.7 percent against the euro.

South Africa’s benchmark FTSE/JSE Africa All Share Index of stocks rallied more than 17 percent in the past week, the biggest five-day increase since 1995 and the first this month. Europe’s Dow Jones Stoxx 600 Index climbed 12 percent in the week.

Economic Packages

The rand strengthened with emerging-market currencies including the Brazilian real and the Turkish lira after China’s central bank cut interest rates by the most in 11 years on Nov. 16, three weeks after the government announced a $586 billion plan to boost growth in the world’s fourth-biggest economy.

The Federal Reserve also committed $800 billion to unfreeze credit markets and arranged a $306 billion government rescue of Citigroup Inc., while the European Union proposed a 200 billion- euro ($258 billion) spending package.

The rand also gained after inflation slowed for a second month in October, boosting speculation the South African Reserve Bank may cut its main interest rate from 12 percent, the highest level in more than five years, on Dec. 11.

Consumer-price growth eased to 12.4 percent from 13 percent in September, Pretoria-based Statistics South Africa said on Nov. 26. Producer-price inflation slowed to 14.5 percent in October, the weakest pace in six months, the national statistics body said Nov. 27.

Government bonds were mixed. The yield on the benchmark 13.5 percent security due September 2015 rose four basis points in the week to 8.30 percent. The yield on the 13 percent note maturing in August 2010, which is more sensitive to interest-rate expectations, slipped 14 basis points to 8.28 percent. Yields move inversely to bond prices.

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