CAEP TOWN – South Africa’s rand advanced for a second day against the dollar as stocks rose and investors increased their stakes in higher-yielding, emerging-market assets.

The rand, which is little changed this past week, declined 33 percent this year as foreigners sold the country’s shares and bonds, partly on concern it will struggle to finance its current-account gap amid the world’s worst financial-market crisis since the 1930s. Europe’s Dow Jones Stoxx 600 Index advanced 2.6 percent The MSCI Asia Pacific Index gained 1.1 percent.

“The rand is taking its direction from offshore equity markets,” said George Glynos, managing director in Johannesburg of Econometrix Treasury Management, which advises clients on bond and foreign-exchange transactions. “The European equity markets are all in the green at the moment. That is one of the reasons why emerging markets, generally speaking, are responding to lower levels of risk aversion.”

Against the dollar, the rand gained 1.4 percent to 10.167 by 2:20 p.m. in Johannesburg, from 10.2600 yesterday. Earlier, it fell to as low as 10.5051.

South Africa’s benchmark FTSE/JSE Africa All Share Index of stocks climbed for the first day in four, advancing 2.3 percent. The index has fallen 32 percent this year.

Government bonds rose, with the yield on the benchmark 13.5 percent security due September 2015 falling 6 basis points to 8.86 percent. The yield on the 13 percent note maturing in August 2010 lost 7 basis points to 9.26 percent. Yields move inversely to bond prices.

“Over the past couple of weeks, we have also very clear indications that foreigners are starting to see value in South African bonds,” Glynos said. “We have seen bond inflows to the tune of about 11 billion rand so far for the month of November.”

– By Mike Cohen in Cape Town | Bloomberg.com: Africa