The South African rand was steady against major currencies, but well off Wednesday’s best levels, in early trade on Thursday after correcting overnight. Currency traders said that the rand’s move over the past couple of day’s had been overdone and that the currency had returned to more realistic levels.
On Wednesday morning, the rand traded below R6,55 per dollar for the first time since early April 2000 after rallying overnight on the back of a dollar sell-off.
At 8.40am, the rand was trading at R6,6151 to the dollar from a New York close of R6,6301 on Wednesday, a close of R6,5650 on Tuesday and R6,7165 just after 4pm on Tuesday afternoon locally. It was trading at R7,8781 to the euro from a previous R7,8701 and at R11,2366 against sterling from a previous R11,2553.
The euro was quoted at $1,1924 from $1,1877 late on Wednesday in New York and $1,1974 late on Tuesday, while gold was quoted at $393/oz from a previous $395,05/oz.
“If you look at the rand’s move against the crosses over the past day or so, when it firmed from R6,68 to R6,53 against the dollar, this was overdone. The rand outperformed the euro and sterling and we saw an adjustment of this overnight,” a currency trader said.
He continued that demand for dollars had also been seen at about R6,57 to R6,58.
“With a lack of follow through on the euro and a general adjustment of the dollar against most currencies, the rand moved to R6,61 to R6,62, where it should have been yesterday.”
The trader continued, however, that prospects for the rand were still very good.
“We should see good resistance at R6,65 to R6,67, where there is likely to be exporter interest. R6,55 will be very tempting for importers,” the trader concluded.
Dow Jones Newswires reports that the dollar rebounded after hitting record lows against the euro and three-year lows versus the yen on Wednesday, helped in large part by intervention by Japanese monetary authorities.
The Bank of Japan, acting on behalf of Japan’s Ministry of Finance, was widely suspected of intervening heavily overnight to help lift the dollar up from a fresh three-year low around Y107,57. The central bank is estimated by traders to have sold somewhere between $5-billion and $10-billion-worth of yen to boost the dollar back above Y109.
The ministry has been aggressively trying to keep the yen from appreciating too rapidly and threatening Japan’s export-led recovery, selling a record Y14,55-trillion during the first nine months of this year.
While Japanese exporter sales pared some of the dollar’s overnight gains in Asia on Thursday, the perception that Japanese financial authorities would act again kept dollar bears on a leash. — I-Net Bridge