Johannesburg | Tuesday
SOUTH Africa’s rand nudged further ahead on Tuesday to its best levels for nearly seven weeks, with traders divided on whether the currency’s impressive recovery so far this year has nearly run its course.
At 1020 GMT, the rand was trading about seven cents firmer than late on Monday at 10,9375 against the dollar, after briefly touching a best level of 10,9050 — its strongest since March 5.
Traders said the currency had decisively broken the 11.05/06 level against the US unit and was now targeting 10,80 — its firmest point so far this year, reached in early March.
But opinion was mixed on whether it would break that level — which would mean it had clawed back all of its losses since an unprecedented plunge began in late November, taking it to a record low of 13,85/dollar on December 20.
”If we don’t go back up through 11, we are likely to take a look at 10,80,” Barclays Treasury head Andy Horne said.
”It’s looking very constructive — we could go to 10,80 and then lower. It’s possible we could reach 10,20, at the moment it’s ignoring all bad news. At the end of the day 10/dlr is the probably the correct level,” he said.
The rand lost 37% of its value against the dollar last year, and the government has launched an official inquiry into the depreciation. It has recovered by about 21% from its historic low in late December.
The central bank has raised interest rates by 200 basis points so far this year in a bid to quash the inflationary impact of the rand’s slide, and most expect another 100 basis point hike when it holds its next policy meeting in June.
This is likely to curb growth in the economy, which the government has forecast at 2,3% in 2002.
South African bonds gave up early gains sparked by the firmer rand, with traders still wary ahead of March producer price data due at 0930 GMT on Wednesday.
A Reuters poll of economists sees the PPI index climbing by an annual rate of 14,1% in March — up from 13,2% in February and its fastest increase since January 1991.
The yield on the most-traded R150 bond, due 2005, was up two basis points at 12,37% while the yield on the longer-dated R153 bond, due 2010, was up one basis point at 12,62%. – Reuters