Cape Town - South Africa’s rand gained, rebounding from a 4 1/2-year low, after an unexpected jump in Chinese manufacturing. Bond yields extended their climb to 20-month highs after meeting minutes showed the Federal Reserve is moving closer to reducing stimulus.
Copper, gold and platinum rose after HSBC Holdings Plc’s preliminary reading of China’s Purchasing Managers’ Index increased in August from an 11-month low, adding to signs the world’s second-biggest economy is stabilising.
China is the largest buyer of South African raw materials.
Fed officials were “comfortable” with Chairman Ben S. Bernanke’s plans to start reducing bond buying this year should the US economy improve, July minutes showed.
South Africa’s currency gained 0.3 percent to 10.3652 per dollar as of 11:08 a.m. in Johannesburg, rebounding from a 0.5 percent decline to 10.4435 earlier, the weakest level since March 2008, and a 2.3 percent drop yesterday.
Yields on benchmark 10.5 percent bonds due December 2026 climbed nine basis points, or 0.09 percentage point, to 8.69 percent, the highest on a closing basis since January 2012.
The rand “had gone too far” and will “probably pull back from here,” Vivienne Taberer, a money manager who helps oversee about $14 billion in emerging-market assets at Investec Asset Management, said by phone from Cape Town.
“The move was too big. We’ve had relatively good European flash PMIs, we’ve had a good number out of China.”
Euro-area services expanded in August for the first time in 19 months, led by Germany, after the 17-nation currency bloc’s economy emerged from a record-long recession.
Copper for delivery in three months on the London Metal Exchange rose as much as 1.5 percent, while lead, nickel, zinc, tin and aluminum also advanced.
Gold added as much as 0.6 percent and platinum 0.5 percent. Metals and other mining commodities account for more than 50 percent of South Africa’s exports, according to government data.
The Fed’s debate over when to taper $85 billion in monthly bond buying has roiled financial markets from Jakarta to Mumbai to New York.
Some policy makers have said the purchases, while helping reduce unemployment, are stoking excessive risk taking in assets such as junk bonds and leveraged loans. Housing and jobs data today may add to recovery signs.
“The official line remains open-ended: paring back bond purchases is likely to begin sometime this year,” Marc Ground and Varushka Singh, analysts at Standard Bank Group Ltd. in Johannesburg, said in a e-mailed note.
“The lack of clarification has kept anxieties around Fed tapering elevated, adding to dollar strength against most currencies, particularly those of emerging markets.” - Bloomberg News