The rand slipped against the dollar in overnight trade, opening on Tuesday at the weak end of its range and poised for further losses, dealers
said.
The rand has made steady gains over the last month, capping the move with a 2,6% gain to push below the psychological level of 10 to the dollar last week, but traders said the market was consolidating, and that some players were stepping in to take profits from their long dollar positions.
By 0700 GMT the rand was trading at 9,8775 against the
dollar, some six cents weaker than its Monday close in
Johannesburg. Dealers said technical considerations pointed to a retracement of earlier gains back to the 10 level, if support at 9,87 was breached. ”9,87 was quite a big level on the way down. Today the rand
will test the 87 level and could possibly move up to the 92 level,” said one.
”Technically if it goes above the 85-87 level we should start a correction towards 10,” he said, adding that there was more profit taking on the horizon. Bonds looked likely to weaken with the currency, with no major announcements expected.
”We are not looking for too much excitement,” said one market player. ”The market has quietened down quite a bit.” He added that bonds, which weakened on Monday, were likely to consolidate recent gains further on Tuesday. The key short-dated R150 due in 2005 was five points weaker at 11,76%, while the yield on the longer-dated R153 bond, due 2010, rose slightly to 11,36% from 11,325% at Monday’s close. Short-term money markets remained highly inverted, with a three month interbank loan priced at 13,477%, and a forward agreement for that loan priced at 13,41%.
One year overnight deposit loans were bid at 12,95 percent. One bond analyst said the market had overbought on upbeat economic news, and was now slipping back into pricing in the risk of future rate hikes. ”Too much good news has been coming in to the market, and the price action has been a bit too optimistic,” he said. ”We are seeing that in the Forward Rate Agreement curve.” Traders said the markets 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 moving significantly.
CPIX consumer inflation data is released next week, but most players said they were looking straight to the MPC meeting for their cues. – Reuters