South Africa’s rand clung to single-digit territory against the dollar on Thursday but no more big gains were seen on the immediate horizon. At 1115 GMT, the rand traded at R9,9625, about 14 cents firmer on the day.
”I think the fact we’ve gone through 10 is already quite a big psychological barrier. I don’t think it’s going to go too much farther from here in the short term without testing back a little bit,” said Royal Bank of Canada emerging markets analyst Michael Every.
The rand briefly broke below R10 on Tuesday for the first time in over three months and dealers say a resumption of its rally was briefly delayed by the bombings near Johannesburg on Wednesday which have been blamed on white right-wing groups.
The rand has gained close to 20% against the dollar this year after plummeting 37% in 2001. The rally has been fuelled by an appetite for the attractive yields offered by steep domestic interest rates. But its moves below R10 have been brief, suggesting that it will be tough to sustain gains below that level.
A Reuters poll sees the country’s trade surplus in September narrowing to R3,0-billion rand from R3,85-billion rand in August. Bonds remained firm on the interest rate outlook after the government said in its medium-term budget policy statement on Tuesday it was relaxing its inflation target for 2004, taking pressure off the central bank to hike interest rates again.
The yield on the short-dated R150 was down eight basis points to 11,91%. The yield on the longer-dated R153 was down two basis points to 11,62%. – Reuters