Rand Gains on Speculation China Stimulus to Boost Gold

The rand gained for the first time in 10 days as commodities rallied on bets China will focus more on bolstering economic growth, boosting demand from the biggest industrial metals user. Bonds advanced for a fourth day.

South Africa’s currency appreciated as much as 1.2 percent and traded 0.8 percent stronger at 8.2689 per dollar by 6:07 p.m. in Johannesburg. The rand weakened 2.9 percent last week. The yield on the nation’s 6.75 percent bonds due 2021 dropped six basis points, or 0.06 percentage point, to 7.62 percent.

China should continue to implement a “proactive fiscal policy and a prudent monetary policy” to maintain growth in the world’s second-largest economy, Premier Wen Jiabao said during a tour of Wuhan in Hubei province over the weekend. German and French leaders meet today in Berlin before a European Union summit on May 23 to map out a revised plan after Greece’s possible exit erased almost $4 trillion from global stock markets this month.

“Commodity prices have rebounded somewhat on the news, with commodity currencies also beneficiaries of the tentative improvement in sentiment,” Nomvuyo Guma, a currency strategist at Standard Bank Group Ltd. in Johannesburg, said in e-mailed comments. “A fairly light slate this week is likely to leave markets watching Europe.”

The Standard & Poor’s GSCI Index of raw materials advanced for the first time in four days as metals including copper, nickel and platinum gained. Metals and other commodities account for 45 percent of South Africa’s exports. The nation has the world’s biggest mineral reserves, according to Citigroup Inc., and is the biggest producer of platinum and chrome.

Monetary Policy
Bonds extended a four-day rally on speculation the central bank will leave interest rates unchanged, even as inflation quickens, to boost growth in Africa’s biggest economy.

The Monetary Policy Committee, led by Governor Gill Marcus, will leave the benchmark rate at 5.5 percent on May 24, according to all 18 economists surveyed by Bloomberg. South Africa’s consumer price index probably rose by 6.2 percent in April from a year earlier, according to the average estimates of 17 analysts surveyed by Bloomberg.

A report on May 23 will show the consumer inflation rate quickened to 6.2 percent in April, from 6 percent the previous month, according to the median estimate of 17 economists. The central bank’s mandate is to keep inflation within a 3 to 6 percent target range.

“The local rates market is pricing off growth uncertainties, rather than the potential inflation risk posed by the rand’s current weakness,” Carmen Nel and Mamello Matikinca, analysts at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “The market is fully pricing in a notably less hawkish MPC statement for this week, expecting the focus to fall squarely on growth risks.”

Forward-rate agreements starting in a year dropped four basis points today to 4.64 percent, the lowest since December, as traders pared bets on an interest-rate increase in the next year. The contract rate has dropped from as high as 6.3 percent in March.