South Africa's rand snapped two days of declines against the dollar and the euro as interest-rate cuts in Europe and Asia increased the relative attractiveness of the country's higher-yielding assets, TehranTimes reported.
The gains pared the currency's decline versus the dollar this week to 2.9 percent. The Bank of Korea lowered its key interest rate for the third time in four weeks on Saturday following reductions on Friday in the euro region, U.K. and Switzerland. The rand has lost more against the dollar this week than all but two of 16 major counterparts.
"We are seeing a technical rebound in the rand after rate cuts around the world," said Russell Lamberti, an analyst in Johannesburg at Econometrix Treasury Management, which advises clients on bond and foreign-exchange transactions. "Relatively high domestic interest rates cushion the rand by making it more expensive to short. It does give us a yield advantage over other markets." A short position is a bet an asset will weaken.
The rand strengthened as much as 3.5 percent to 9.9251 per dollar and was at 10.0880 by 4:45 p.m. in Johannesburg, from 10.2850 on Friday. South Africa's currency will trade toward 8 per dollar by mid-2009, according to Lamberti.
It also appreciated 1.4 percent to 12.9025 per euro, paring its weekly decline against the European currency to 3.6 percent.
Gains for the currency may be limited after the South African Reserve Bank said the nation's foreign-currency reserves fell 4.4 percent to $32.9 billion by the end of October, compared with September. Reserves were expected to drop 1.2 percent, according to the median estimate of five economists surveyed by Bloomberg.