Bernard Swanepoel placed his faith in the South African rand when few others would.
In December, with the rand having fallen 24 percent to a record low in two months to become the worst-performing currency against the US dollar, the chief executive of Harmony Gold Mining Co locked in the sale of a quarter of the company's gold at a fixed exchange rate of R11.2 to the dollar.
Five months on, the rand is the world's best performer and Swanepoel's bet is paying off. The rand has risen 18 percent this year to R10.11 to the dollar, with climbing gold prices and optimism about a global recovery luring investors to South Africa, pushing up the benchmark stock index by 31 percent in dollar terms.
"We look a lot smarter than we really are," Swanepoel said.
"We were pretty confident that the rand had overreacted." Investors agree that the rand was so low it had to go up. At its record lows in late December a bottle of beer in a South African bar cost just 57 cents, while a double room at Johannesburg's five-star Sandton Towers Hotel cost US$82 a night.
With demand for South African exports rising, Sandra Gordon, an economist for foreign exchange trader Master Currency, now forecasts a year-end level for the rand of R10.0 per dollar. It was recently trading at R10.11 to the dollar, while the record low on Dec. 21 was 13.84.
Since then, gold miners such as Harmony, AngloGold Ltd and Gold Fields Ltd have risen to records as foreign investors bought a net R5.9 billion of South African stocks this year. Gold has gained 13 percent to a high of US$313.90 an ounce.
The prospect of a stable or strengthening currency has brought foreign bond investors back to South Africa, buying a net R3.9 billion of bonds in the first four months of the year after selling R47 billion of bonds in the previous two years.
Many foreign investors sold South African bonds last year as the slump in the rand made yields of 12 percent unattractive.
"The minute you start to smell the currency has stabilized, 12 percent is absolutely fantastic," said Jos Gerson, chief economist at Merrill Lynch in Cape Town, in a radio interview.
For export manufacturers and the tourism industry, the low rand was a boon. When Swanepoel made his move, a Big Mac hamburger cost US$0.82 in South Africa, the cheapest in the world, according to the Economist's Big Mac Index, which measures the purchasing power of currencies. In the US, a Big Mac costs an average of US$2.60.
Exports became competitive while South Africans found imports too expensive. Platinum producers, carmakers, iron-ore miners and clothing manufacturers benefited from the weak rand, helping South Africa post its sixth consecutive quarterly trade surplus in the first three months of 2002, even as many commodity prices fell.
The rand's frailty prompted Wetherlys Investment Holdings Ltd, a furniture retailer, to seek export opportunities. This month, it opened its first store in Spain, selling South African furniture.
"I've just come back from Spain, and I visited some of our competitors there," said Wetherlys Financial Director David Jacobson said. "It's just unbelievable how competitive we are. It's scary."
Even after this year's 15 percent rally in the rand, the South African currency is still 20 percent below its level in early September last year.
In February, currencies linked to the price of metals and other raw materials, such as the dollars of Australia and New Zealand, rallied on optimism of a rebound in commodity prices.
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