Cape Town - The rand gained to the strongest level in a week as yields among the highest in emerging markets lured foreign investors to South Africa’s bonds, outweighing risk aversion sparked by the US government shutdown.
Foreigners bought a net 592 million rand ($59 million) of South African bonds yesterday, a third day of inflows, according to JSE Ltd. data.
Foreign investors have bought 1.2 billion rand of the nation’s debt since the partial shutdown began.
South Africa depends on portfolio inflows to plug its current-account deficit and support the rand.
“One reason for the rand’s resilience remains the strong portfolio inflows,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments.
Foreign bond and equity purchases since the start of the shutdown are “equivalent to a monthly rate of around 10 billion rand, which is good but not brilliant” he said.
The rand appreciated 0.4 percent to 9.9615 per dollar, the strongest level since October 1, as of 11:39 a.m. in Johannesburg.
Yields on benchmark 10.5 percent bonds due December 2026 were little changed at 8.04 percent.
South African local-currency 10-year yields are the third- highest after Greece and Turkey among emerging-market peers in Europe, the Middle East and Africa, according to data compiled by Bloomberg.
Federal Reserve Bank of Dallas President Richard Fisher said yesterday the US “cannot afford to default” and that debt ceiling talks “will come down to the wire.”
With the country’s borrowing authority set to lapse October 17, President Barack Obama reiterated that he won’t negotiate with Republicans over raising the debt ceiling or reopening the government. - Bloomberg News