A holiday in some parts of continental Europe is seen aiding the South African rand’s recent strength and the rand is seen trading in a broad range on Monday, traders said.
The rand broke below the 10.00 to the dollar level on Friday — the first time since November 29 last year — triggering stop-loss dollar sales.
The move below 10.0/dlr was also attributed to further dollar weakness as the US unit tumbled to a seven-month low against the euro and a five-month low against the yen, undercut by the market’s pervasive bearishness on the US economy.
”The rand will continue being strong, it’s a Europe holiday and it tends to quiet things down when there’s a holiday. I think guys will look to sell into any rally in the dollar up to 10.05 to 10.08,” said a Nedcor rand trader.
The rand’s resistance level was put at 9.85 rand against the dollar.
At 0612 GMT the rand was bid at 9.99 to the dollar.
Whenever the rand has approached 10.04-07/dlr recently it has been repelled by technical factors and by importers, made jittery by the currency’s 37% slide in 2001, searching for the cheapest dollars they have seen since last year.
It has clawed back about 15% of its value this year in a rally fuelled by a higher gold price and expectations of an upturn in the commodity cycle.
There is also broad agreement that the country’s economic credentials did not warrant last year’s steep fall.
But sluggish growth could cap gains in the longer term, with the central bank expected to raise interest rates by 100 basis points for a third time this year in June — if not before — in a bid to quash the inflationary impact of the rand’s 2001 slide.
The market will carefully scrutinise April consumer and producer inflation data this week for clues on this score. A poll of economists by Reuters on Friday showed the indicators are both seen rising, strengthening the central bank’s case.
Bond were slightly firmer but were not seen moving far in either direction before the CPI data on Tuesday.
The yield on the key R150 bond was one basis point down at 11.82% from 11.83 late on Friday. The yield on the longer-dated R153 bond was bid at 11.795 percent compared to 11.84% late on Friday. – Reuters