South Africa’s rand held to firmer ground on Friday after grabbing another one percent gain against the dollar overnight, with traders predicting a test of
the year’s best level of 9,67/dollar during the session.
At 0650 GMT the rand was trading at 9,77 against the dollar, seven cents firmer than its Johannesburg close. Earlier it touched 9,75, its best level since late May, when it briefly touched 9,67/dollar.
Traders said renewed dollar weakness was only one reason for a broadly-based rally which has seen the rand appreciate by 7,6% against the pound, 8,1% against the dollar and 5,6% against the euro since September 30. ”There is nothing to stem the tide at the moment, the feeling is positive across the board,” one local trader said.
”If we breach 9,70/75 we break a very strong long-term
uptrend (weaker) from six rand to the dollar — that would target a move to 9,50/20 and we could even move eventually down to 8,89,” he added.
A shift in sentiment in favour of South Africa after the rand shrugged off bad news from Latin America earlier this year, coupled with appetite for higher yields from what is seen as a relatively low risk emerging market has fuelled offshore demand.
Nightmarish memories of the rand’s historic plunge late in 2001 were also beginning to recede in the local market, adding momentum to the trend. More exporters were still likely to flock in with their
foreign exchange earnings after waiting in vain for the rand to retrace, traders said. The rand has clocked up gains of 23% against the dollar so far this year, and firmed by more than 13% on a trade-weighted basis, making it the best performing emerging
market currency so far in 2002.
Comments on Thursday from central bank governor Tito
Mboweni, who said the bank would avoid taking steps to meet its inflation target at the expense of the economy, were also seen as supportive.
Mboweni’s remarks dispelled any remaining fear that interest rates would rise again when the bank holds its next policy meeting on November 27-28, adding steam to a rally in domestic bonds, traders said. The yield on the longer-dated R153 bonds, due 2010, was down another 20 basis points to 11,30%. The shorter-dated R150 due 2005 was six basis points firmer at 11,64%. – Reuters