The South African rand was hovering around the R7 per dollar level in noon trade on Tuesday, after trading as low as R6,9875 earlier in the morning. Better-than-expected producer inflation (PPI) data released at 11.30am failed to weaken the local unit and currency traders saw it firming further.
At 11.59am, the rand was trading at R7,0150 to the dollar from a New York close of R7,1176. It traded at an intraday — and three-year — best level of R6,9875 earlier in the morning.
The rand was also slightly stronger against the euro at R8,1790 from Monday’s R8,2366 and was quoted at R11,7270 against sterling from R11,8473.
The euro, which the rand tends to track as it is the currency of South Africa’s largest trading partner, was trading at $1,1670 from $1,1620 late on Monday in New York, while gold was quoted at $384,80 an ounce from a previous $382,25/oz.
“The rand broke below R7,00 on stop losses triggered through R7,05. The [dollar selling] is out of London and Johannesburg. It is likely to go to R6,85 — this is a big move,” a currency trader said.
The rand’s move firmer started late on Monday on the back of a stronger euro and general dollar weakness. The euro was trading below $1,14 on Monday morning.
The rand failed to respond to the release of PPI data, even though this pointed to an interest rate cut of more than 100 basis points in October.
Favourable interest rate differentials and the related carry trade are widely regarded as a reason for the rand’s strength in recent months.
South African producer prices for all commodities rose 0,2% in the 12 months to end August from a 1,5% increase for the 12 months to the end of July, Statistics South Africa said on Tuesday. On the month, they were down 0,5% in August on an actual unadjusted basis from a rise of 0,4% in July.
South Africa’s August producer price index (PPI) was expected to increase by a median of only 1,1% y/y, according to an I-Net Bridge survey of private sector economists. The range of forecasts was from 0,5% y/y to 1,5% y/y.
The rand also shrugged off better-than-expected money supply data released at 8am.
The rate of growth of South Africa’s broad M3 money supply measure rose by 5,09% in the year to the end of August from a revised 7,25% (previous estimate was 7,17%) in the year to end-July, the South African Reserve Bank said on Tuesday.
Credit extension to the private sector (PSCE) grew at a rate of 16,79% y/y in August from a revised 18,15% (18,09%) in July. According to the new definition, which excludes loans made to provincial governments, credit extension growth was at 17,84% y/y from July’s revised 18,94% (18,88%).
The range of economists’ expectations for M3 was from 6,5% to 8,1%, while that for PSCE was between 15,8% and 17,8%. — I-Net Bridge