After weakening sharply late on Wednesday afternoon to levels above R7,90 per dollar, the rand had recovered somewhat overnight and was below R7,80 per dollar in early trade on Thursday.
Market players are continuing to digest the contents of Wednesday’s budget.
By 8.50am the rand was bid at R7,7743 to the dollar from its previous close of R7,8300.
It was bid at R11,4639 to the euro from a previous R11,4772 and at R15,1548
against the pound from R15,1453 before.
RMB analysts said in their morning commentary that the rand is swinging wildly. RMB said it seemed that the rand could break the lower end of the range at R7,56 on Monday, but by Wednesday it pushed to R7,91.
“These moves are indicative of the poor sentiment towards the unit. The ZAR recovery was widely seen as only temporary and in hindsight it seems that as soon as it stabilised everyone rushed back into the trade. Once again we see the pattern of slow gains, rapid losses on the ZAR,” they said.
“Interestingly, the gap from R7,80 to R7,90 came exactly at the same time as the budget was released. Some ascribe this to the relaxation of exchange controls, others to their overly bullish budget assumptions, still others to the lack of a countercyclical fiscal stimulus. To complicate matters, the US dollar had a major spike at almost exactly the same time, which was widely reflected in other emerging markets,” they said.
The government on Wednesday relaxed exchange controls, allowing institutional investors to invest more offshore.
Coming into Thursday morning, the rand was trading at the R7,80 level.
“Short-term direction is very difficult to call in this choppy market. Still, the ZAR moves yesterday [Wednesday] seem overdone,” RMB said.
The M&G Online budget special report is brought to you by the