South Africa’s rand started trading a touch firmer against the dollar early on Monday and is expected to follow overseas market activity in the absence of key domestic economic data.
At 6.35am GMT, the rand traded at 6,7850 against the United States currency, up 0,29 % from Friday’s closing levels.
But market analysts ETM said a retreat by commodity prices appeared to have filtered through to some degree on the rand, which had backed away from strong levels reached on Friday.
The rand hit an intraday high of around 6,73 against the dollar on Friday, according to Reuters data.
”Encouragingly for the rand, the Japanese yen has also come under pressure, suggesting that foreigners are still looking at the carry trade as a potential investment strategy,” said ETM.
”So long as Wall Street retains some element of stability, the rand should retain some resilience.”
In carry trades, investors use the low-yielding yen to fund purchases of high-yielding, if riskier, currencies like the rand.
However, in recent weeks nervous investors have been prone to unwind carry trades in the face of credit worries linked to problems in the US subprime market.
The blue chip Top-40 December futures contract was down 0,3% at about 6.35am GMT, signalling a weak start for local equities when the market opens at 7am GMT. — Reuters