Johannesburg | Wednesday
SOUTH Africa’s rand remained a bit stronger on Wednesday, but a lack of domestic incentives and the tense international backdrop were expected to keep a lid on the currency in the short term.
Chartists also said that technically the currency looked like it would remain stuck in a range for the next few days.
The rand traded at 11.2100 to the dollar by 0945 GMT, firming four cents from its levels late on Tuesday when it spent the day trading sideways but ended weaker.
”Technically, it looks like we will be stuck in a range between 11.30 and 11.10/dlr over the next couple of days,” said S&P MMS analyst George Glynos.
”The moving averages show no dramatic movement,” he said.
He added that it could — though the momentum was not great — make a move to 11.41 to the dollar, which would be a 38% retracement from its April 4 best level of 11.03 to its recent worst level of 12.0487, reached on March 19, according to Reuters’ data.
Importers have also been capping gains.
”The rand has been stronger recently and that obviously entices importers to come in — but at the same time it hasn’t flown away, it’s been trading in range,” said a senior Johannesburg-based trader.
Analysts said the dearth of significant domestic economic indicators this week, combined with the escalating conflict in the Middle East had contributed to put a brake on the market.
”The global political risk is not conducive to stability in the international forex market and definitely not favouring emerging market currencies,” said PSG Investment Bank in a research note.
Tension in the Middle East is in particular fuelling higher oil prices, a potential cause for concern for South African bond investors who are already grappling with rising inflation due to the impact of the rand’s sharp drop last year.
The rand lost 37 percent of its value to the dollar in 2001, although it has now recovered some 20 percent since touching a record low at 13.85 on December 20.
Bonds were also a tad stronger after weakening on Tuesday.
The yield on the mostly traded R150 bond, due 2005, was down two basis points to 12,52%. The yield on the R153, due 2010, was steady at 12,935%. – Reuters