Business

Rand gains after hitting five-year low

Robert Brand

The rand has gained following a drop which appeared to have been overdone.

The rand depreciated 0.7% on January 3 to 10.76 per dollar, the weakest level since November 2008, amid speculation the Federal Reserve will end its bond-buying programme as the US economy recovers. (Gallo)

South Africa’s rand gained for the first time in five days as technical indicators suggested the currency’s slump to a more than five-year low against the dollar had gone too far.

The stochastic oscillator [a momentum indicator used in the technical analysis of securities trading] for the rand versus the dollar climbed to 76 on Monday, above the 70 threshold that indicates the currency may be oversold.

The rand’s relative strength index rose to 73 on January 3, the highest since May, before dropping to 67.6 on Monday, signalling the possible start of a turnaround, according to data compiled by Bloomberg.

The rand strengthened 0.6% to 10.6988 per dollar by 10:40 am in Johannesburg, paring its 2014 decline to 1.9%. Yields on benchmark rand-denominated bonds due December 2026 rose three basis points, or 0.03 percentage point, to 8.31%.

The South African currency depreciated 0.7% on January 3 to 10.76 per dollar, the weakest level since November 2008, amid speculation the Federal Reserve will end its bond-buying programme this year as the US economy recovers.

The Fed said on December 18 it would trim monthly bond buying by $10-billion this month. The central bank releases minutes of the meeting on January 8. – Bloomberg

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