The South African rand was trading close to a 21-month best level against the US dollar in mid-morning trade on Tuesday — testing 7,8377 against the greenback.
It’s best level so far this year so far has been 7,8357 per dollar, which it firmed to in after hours trade on March 5, but dealers say it could move below this level on Tuesday spurred on by dollar weakness.
Currency traders said that trade data released on Monday afternoon showed good exporter supply of dollars was the trend in the market and that the rand was unlikely to weaken against this backdrop.
“Looking at the trade balance figures that came out yesterday and for the past year or so, there are too many export dollars in the market — it is going to be very difficult for the rand to weaken,” a currency trader said.
He explained that a trend was emerging where there was good dollar supply, but not too much demand, which favoured a strong rand. In US dollar terms using the monthly average exchange rate to convert rand to US dollars, South African exports rose by 33,5% y/y in February 2003 to $2,855-billion, while in rand terms they eased by 3,7% y/y, data released by Customs and Excise on Monday showed.
South Africa recorded a trade surplus of R2,648 billion for its trade with non-Southern African Customs Union (SACU) trading partners in February. This compared with a surplus of R1,494-billion in January and a R6,078-billion surplus in December.
According to Dow Jones Newswires, the dollar fell against its major rivals on Monday as the foreign-exchange market braced for an extended war in Iraq.
With coalition bombers pounding Republican Guard positions outside Baghdad and heavy fighting continuing in the south and central regions of the country, expectations for a quick and clean for the US-led coalition have all but disappeared, traders said.
The rand was quoted at 7,8580 to the dollar at 1036 local time. – I-Net-Bridge