South Africa’s rand slipped against the dollar on Monday, consolidating back into a new range after weeks of solid gains, traders said.
The rand has advanced steadily since the beginning of
October, and gained 2,6% last week, but traders said the market was beginning to run short of dollars and market participants were stepping in to take profits from the move. By 1030 GMT the rand was trading at
9,84 against the dollar, some seven cents weaker than its Friday close in Johannesburg.
Dealers said the currency could still stage a recovery and push past Friday’s high water mark of
9,7175, the rand’s best best level since early June, if resistance at 9,75 and 9,72 were breached. But they said flow trading would have to spur such a move,
since speculative investors were keen to take profits.
They added that importer and exporter orders were thin on the ground, especially with US markets
closed for the Veterans’ Day holiday. ”We have had a very good run over the last week or two,” one
Johannesburg-based trader said. ”We are due for a correction back to the topside.” He said the move back was probably driven by speculator profit taking. ”From the flow point of view we have seen
nothing,” he added. But the trend remained for a stronger currency, despite the consolidation, which traders said would peg the rand into a range between 9,85 and 9,75.
”If the dollar/rand does break through 9,75 and 9,72, it could go as low as 9,50,” the trader said. Other traders remarked that it would take fresh news to
shift the currency out of its range. One said the rand might have to wait for further details on
interest rate policy, due at the end of the central bank’s Monetary Policy Committee meeting on
November 28, before it moved significantly. He said the market could need time to consolidate, and would
brush off all but the most significant of figures released in next week’s CPIX consumer inflation data.
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. The yield on the longer-dated R153 bonds, due
2010, rose slightly to 11,325% from 11,28% at Friday’s close.
The shorter-dated R150 due 2005 was six points
weaker at 11,71%. Money markets hiked their three month rates slightly to 13,477% from about 13,4% last week, steepening the already highly inverted
yield curve. – Reuters