The South African rand was slightly weaker against major currencies in early trade on Friday on the back of comments made by the International Monetary Fund (IMF) on Wednesday afternoon that the rand was likely to retreat to R8,40 to the dollar.
Currency traders said that the rand could be in for further weakness after its strong rally in recent months.
At 0905, the rand was trading at R7,3300 to the dollar from a New York close of R7,2377. It was also softer against sterling and the euro, trading at R11,7899 against the former from a previous R11,6918 and at R8,2158 against the latter from Thursday’s R8,1433.
The euro was quoted at $1,1212 from $1,1236 late Thursday in New York, while gold was quoted at $340,50 an ounce from a previous $338.63/oz.
“The rand is showing a weaker tendency on the back of the IMF interview,” a currency trader said.
He added that the unit had weakened to R7,38 on Thursday when local financial markets were closed for Workers’ Day, before recovering to R7,2350 on the back of the stronger euro.
“The rand is weakening slightly against the crosses,” the trader added.
He expected the rand to trade in a range of R7,28 to R7,42 for the day, but cautioned that it could overshoot on the top side of this.
However, the current weakness did not necessarily mean that the rand’s rally was at an end.
“If it doesn’t get up to between R7,60 to R7,70, the guys who were taking profitswill reposition,” the trader asserted.
In the news wire interview on Wednesday, an IMF representative said the rand was likely to revert to an equilibrium level of R8,40 per dollar.
The representative also said he did not see much room for the rand to strengthen further.
Importer demand for dollars also contributed to the rand’s losing ground on Wednesday afternoon.
Dow Jones Newswires reports that the dollar took a beating for the second straight day on Thursday, dropping against its widely traded rivals as poor economic data and a host of longer-term weights again spurred a worldwide flight from the US currency.
The euro climbed to fresh four-year highs, while the Canadian and Australian dollars respectively hit new five-year and three-year peaks as investors courted better yields abroad. Even the Swedish krona got into the act, touching its best level against its US counterpart in three and a half years.
Should the US employment report for April, set for release at 1230 GMT Friday, prove disappointing to markets, the dollar could face a third consecutive session of multi-year lows, analysts said.