South Africa’s rand was steady against the dollar on Wednesday, consolidating after recent hefty gains which propelled the unit to year highs, traders said.
At 0915 the rand was trading at 9,65 per dollar after earlier easing to 9,68. It firmed to 9,5325 on Tuesday, its strongest level since November 16 last year, according to Reuters data. It closed at 9,6575 in overnight trade.
”The unexpected dollar weakness yesterday yielded another failure around 9,53 and the recovery from here warns of a near-term downside failure,” said Darran Grabham, a technical analyst at Rand Merchant Bank.
”A firmer dollar bias is now expected to dominate the remainder of the week with a test on 9,70/9,75 forecast initially. A break here should then unfold targeting 9,85.”
The rand has appreciated by 24% against the dollar this year after sliding 37% in 2001, making it one of the best performing currencies so far in 2002.
Gains have been supported by high interest rate differentials, broad dollar weakness and a turnaround in sentiment towards emerging markets which analysts said confirmed South Africa’s safe haven status in that sector.
The rand’s historic fall in 2001 has ignited inflationary pressures, forcing the Reserve Bank to increase the repo rate by 400 basis points to 13,50% this year.
The central bank holds its next policy meeting on November 27-28 but few expect it to hike interest rates again after the government’s decision to widen the country’s inflation target for 2004.
Bonds were steady after rallying late on Tuesday as the market shrugged off worse-than-expected October consumer inflation figures.
The yield on the short-dated R150, due 2005, was bid at 11,62% from 11,575% late on Tuesday. The longer-dated R153, due 2010, was flat at 10,975%. – Reuters