Rand trades flat – but could break through R12 to the dollar: analyst

The rand was trading slightly weaker on Wednesday morning as the dollar strengthened on the back of stronger economic data from the US.

However, things have been looking up for the country’s economy in the last few sessions, buoyed by a firm investment push from president Cyril Ramaphosa, as well as a more positive economic outlook from the International Monetary Fund.

According to Andre Botha, dealer at TreasuryONE, there is a persisting feeling that South Africa and the rand are in the doldrums at the moment, with little direction from abroad or locally, noting that the rand continued trading in very tight ranges, and the overall range for Tuesday (17 April) was less than 10 cents.

However, he said that the local currency was lagging other emerging markets in a catch-up to the US dollar, and thus was expected to strengthen slightly in the short-term.

“With the rand usually being a volatile currency it is easy to gauge how flat the market is. We have also seen a very quiet bond market with the R186’s steady at 8.06%,” he said.

“An interesting note is that the rand is lagging all the other Emerging Markets regarding catching up to the US dollar which leads us to believe that should the rand play catch up.

“We could see the rand strengthening and the rand could target 11.97 again, but breaking through will not be that easy as the rebound from that level suggests that there is a lot of resistance.”

Botha added that he was still cautious as geopolitical tensions in Syria and the China-USA standoff may flare up any second, despite disappearing into the background over the last couple of days.

“Locally we have the CPI number that will be released, and we expect the number to be quite comfortably within the SARB’s inflation target, but this number will be skewed as it will not include the recent VAT hike or petrol price hikes.”

“We don’t expect any significant moves after the release of the number,” he said.

The rand was trading at the following levels against the major currencies at 09h00 on 18 April:

  • Rand/dollar: 12.04
  • Rand/pound: 17.19
  • Rand/euro: 14.88

Read: Two very different views on where the rand could end in 2018

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Rand trades flat – but could break through R12 to the dollar: analyst