The South African rand traded at R6,1675 — its worst level since November 12 last year — early on Thursday afternoon as funds in London unwound long rand positions. Market analysts said the local unit could be in for a nervous time, possibly weakening further when New York enters the fray.
At 2.35pm, the rand was quoted at R6,14 per dollar from an overnight close of R6,0326. It was quoted at R7,9846 to the euro from a previous R7,8432 and at R11,5900 against sterling from Wednesday’s R11,3730.
The rand’s depreciation came despite a range-bound euro, which was quoted at $1,3019 from $1,3028 late on Wednesday.
“We saw a bit of importer demand this morning, which I think was a catch-up move with the rest of the commodity basket. It pushed the rand to the upper end of its R5,98 to R6,06 range. Above that, offshore funds started getting nervous,” Econometrix Treasury Management market analyst George Glynos said.
“There is talk of CTAs [commodity trading advisers] and real money funds getting nervous. Stops were triggered through R6,07 to R6,08, taking us to where we are now.”
The analyst continued that the big question is what will happen in the United States trading session.
“We have seen the gold price fall sharply and commodity currencies taking a dip as well. We might see levels as high as R6,20 today or tomorrow.
“I’m not sure if the rand will sustain these levels — they are roughly levels where model accounts might consider selling dollars.”
Glynos said that the extent of any rand weakness will be tough to call as it is difficult to gauge how far the rand will go once stops are triggered. However, R6,20 is an obvious target.
Any significant break above R6,20 to R6,23 is a worrying sign (for those in favour of range strength) as it will signal a break of a trendline that has been in place since June 2003.
He said that frustration had been building because of the rand’s failure to sustain a break below R5,90. This caused a slight change in sentiment and people started unwinding long rand positions.
However, the rand might start to look attractive again at weaker levels, particularly if players do not expect South African Reserve Bank Governor Tito Mboweni to announce a cut in the repo rate after the monetary policy committee’s meeting next week.
A currency trader said that while he did not know if it is true, he had heard talk that the dollar sellers are switching from South Africa to Brazil.
He said that most of the dollar demand had come from London. Exporters had been selling dollars as the rand weakened and there was more selling interest above R6,20. — I-Net Bridge