Volatility returned to the South African rand on Wednesday as it lost significant ground after failing to break below the key technical range of $10,04/10,07 in recent days.
”We have tried and failed to break below $10,06 and $10,07 and so it seems like the market is saying how far can we take it in the other direction,” said Barclays analyst Andy Horne.
At 0840 GMT, the rand traded at $10,2750, about 16 cents off its late Johannesburg levels on Tuesday. It hit a morning low of $10,32, its weakest level since Friday.
Horne said it could now target its 200-day moving average of $10,365/10,375. But other dealers said it had scope to rebound and target $10.10 again, although jittery importers were again seen capping gains.
A broadly firmer dollar, inspired by Tuesday’s rally on Wall Street, was also working against the rand, though the dollar had paused for breath after reaching a two-week peak earlier against the euro.
The rand was also seen needing to pause for breath after gaining roughly 15% against the dollar in the year to date after its dramatic 37% slide in 2001.
Bond yields remained slightly up and were seen consolidating with no domestic data to drive the market.
The yield on the key R150 bond was up about four basis points from its late Johannesburg levels to 11,86%. The yield on the longer-dated R153 bond was up three basis points to 11,83%.
With oil prices in Asia at eight-month highs above $29 a barrel, yields were seen being pinned at these levels with the potential to creep a bit higher. Oil prices have a significant inflationary impact on South Africa’s economy. – Reuters