The rand rallied to under R15.30 to the greenback on Thursday as the local unit, although taking a while, suddenly became a “yield play”, Adam Phillips, independent treasury consultant at Umkhulu Consulting, told Fin24.
The local unit regained all of its losses and some more for the year to trade 1.27% firmer at R15.27/$ from its previous close.
“The inflation data is taking the lead here in creating this change in sentiment towards the currency,” he said.
“What is going on in Parliament (behind the scenes), what the 60 top executives have discussed and the make up of the budget is a closely guarded secret.
“We can all make predictions and wish lists, but until (Finance Minister Pravin) Gordhan speaks next Wednesday, there will be a certain amount of ‘thumb sucking’ by operators.
“For that reason they have their seat belts fastened and continue to be nervous,” he said. “We saw some big ‘stop losses’ triggered by foreign players who went long above R16/$ and have been hurt mainly by local asset managers being a good supplier of USD into the market.
“At times the volume can be good, but generally the volumes are thin and dictating the movements,” he said. “It is also clear that interest rates are going to move up.
“I am just glad the rates are causing the movement and we don’t have to use our forex reserves like Mexico did on Wednesday to stabilise their currency.
“It appears that Minister Gordhan is in the hot seat and everyone else in cabinet will have to take it on the chin what he decides,” he said. “Clearly he does not want to see a rating downgrade. If he avoids that, then the yield players will start fighting with the exporters.”