“On Thursday we saw a massive retracement in the rand, gaining as much as 1.5% against major currencies on the back of the ECB rate cut and quantitative easing decision,” Botes said.<\/p>\n
Andre Botha, senior currency dealer at TreasuryONE, agreed that the world suddenly seems like a lot better place than it did in August when ‘risk-off’ was the buzzword.<\/p>\n
He also attributes the local currency’s strengthening to the ECB rate cut and the possibility of an interim trade deal between the US and China.<\/p>\n
“The rand and other EM\u2019s firmed on the two big events yesterday and the rand looks very comfortable around the R14.60 level,” he said.<\/p>\n
Despite the fact that the currency has strengthened to its best level in more than a month, Botes warned that the positivity around the local currency should be tempered somewhat.<\/p>\n
“The rally in the rand, although it can be expected to extend even to around the R14.20\/dollar mark should the favourable environment persist, would not be sustainable in the longer term,” she said.<\/p>\n
“We urge those purchasers looking to acquire foreign currency not to become too greedy, as the rally will eventually run out of steam, and they might end up missing a fantastic opportunity.”<\/p>\n
Rebound?\u00a0<\/strong><\/p>\n The rand’s strengthening is also in line with historical data, according to Bloomberg’s analysts.<\/p>\n The currency slumped about 6% against the dollar in August – the most in a year – as the escalating US-China trade war weighed on emerging-market assets, while Eskom\u2019s troubles made investors wary about South Africa\u2019s fiscal outlook.<\/p>\n An August slump is not unusual for the rand. It has declined against the dollar in eight out of the past 10 years, according to data compiled by Bloomberg.<\/p>\n But in six of those eight years, the currency rebounded in September – including last year, when it posted a 3.7% gain.<\/p>\n
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