South African Rand Stops Decline as Commodities Recover

The South African rand gained today, ending the two-daydrop versus the US dollar, after commodities recovered and on speculation that policy makers will take measures to deal with the European debt crisis.

The Standard & Poor’s GSCI Index of 24 raw materials rose 1 percent, following the yesterday’s decline by 1.7 percent, while the MSCI Emerging Markets Index advanced 0.4 percent. South Africa’s benchmark stock index gained after two days of losses. Greece confirmed budget cuts and increased asset sales to avoid default.

USD/ZAR fell to 6.9710 from 6.9990 today as of 13:35 GMT after it jumped yesterday as high as 7.0180

New Home Sales in the United States crushed economists’ expectations for April, surging by 7.3 percent from March. The median estimate according to a Bloomberg News survey called for new home sales to remain unchanged. After the release, the Commerce Department revised March new home sales up to 301,000 from the previously reported 300,000 rate. The gains last month represent the strongest annual pace since April 2010, and represent the best performance the housing market has had this year so far. At an annual pace of 323,000 in April, it appears that improving job prospects may finally be boosting a housing market that has lagged the broader recovery in the United States. The data is particularly encouraging, considering housing prices are up 4.6 percent from a year earlier, data in today’s report showed.

Source: Bloomberg

While foreclosures continue to depress homes’ values, there could continue to be a rebound inexisting home sales, as the softer prices have made previously owned properties more attractive. The S&P/Case-Shiller index of home values in twenty metropolitan areas confirmed this notion, which was down 3.3 percent in February from a year earlier, the group’s report showed last month.

Yet, there is still reason for concern. The supply of homes as the current sales rate dropped to 6.5 month’s worth in April, from 7.2 in March, the fewest since record keeping began in 1963. Last week, the Commerce Department released a report showing that housing starts fell by 11.0 percent in April to a 523,000 annual pace, the second-weakest reading since the low in April 2009.

In the minutes following the release, the Dow Jones FXCM Dollar Index slid, as the prospects of a stronger U.S. economy boosted risk appetite. Before the release, the Dollar Index was at 9717.78. By 14:15 GMT, the index has fallen as low as 9699.78.