MIRIAM ISA, Johannesburg | Thursday 5.00pm.
THE rand has manged to hold onto its gains on Thursday — trading at R6,97 to the dollar at 4.30pm. Dealers said that it could strengthen to the R6,88 level over the next day or two if it manages to hold its present level and if there is no great demand for dollars.
11.30AM
THE rand firmed early on Thursday morning, pulling back from nail biting lows to trade at around R6,95 to the dollar.
This comes after the rand hit a fresh low of R7,17 against the dollar on Wednesday, but recovered dramatically after South African President Thabo Mbeki said he would not allow a Zimbabwe-style land grab. Ratings agency Standard & Poor’s said on Wednesday that the decline in the value of the South African rand, which has dropped more than 16% this year against the dollar, is not justified on economic fundamentals and had no credit implications. ”When I look through all this noise and smoke… I still see very strong and solid fundamentals,” Konrad Reuss director of sovereign ratings told a press briefing. S&P rates South Africa triple B-minus.
”I think it [the rand’s fall] is overdone. I would more expect a rebond and correction in coming months,” Reuss said. ”Any land invasion in this country would be contrary to policy, contrary to the law. The government would take all necessary steps to make sure that the breaking of the law comes to an end,” Mbeki told parliament. Mbeki’s strong statement against the illegal occupation of hundreds of white-owned farms in Zimbabwe would go a long way to dispel recent market jitters, but may not be enough to reverse the momentum triggered by the crisis, analysts said.
Domestic analysts have repeatedly said the rand’s move into uncharted territory last week, which has also hit domestic debt hard, is unjustified by economic fundamentals. Ahead of Mbeki’s address, they had warned further weakness was possible.
Most of the rand’s slide this year has been prompted by the dollar’s strength, but in the past few days it has also begun to slide against the euro as offshore players dumped South African assets on Zimbabwe contagion concerns. — Reuters