Rand prepares to try out R7 level against weaker dollar
September 24, 2003
By Reuters and Sapa-AFP
Johannesburg - The rand extended its gains yesterday, responding to a broadly weaker dollar. Traders predicted a test of the key R7 to the dollar level provided the global trend holds.
By 4.15pm the rand was trading at a new 21-week high of R7.1275 to the dollar - 9c stronger than its previous close - as the dollar sagged in the wake of Group of Seven comments urging greater currency flexibility.
At 5pm the rand was trading at R7.17 to the dollar.
A local dealer said: "It's obviously stronger on the back of the weaker dollar. Offshore fund managers are selling dollars from R7.20 to R7.22.
"I like R7.10 as the next target.
"Overall we can see it stronger. If we get through R7.10 we can get through R7 easily."
The skittish rand has appreciated by about 20 percent against the dollar this year, but has not quite regained the 32-month peak of R7.045 it reached in April.
Most of the gains this year have been fuelled by the appeal of high domestic interest rates to foreign investors, but the Reserve Bank's stepwise cutting of the repo rate by 350 basis points to 10 percent has had little impact.
Markets are pricing in a further 150-basis-point cut in rates this year, as inflation moves closer to its 3 percent to 6 percent target.
Data showing that the consumer price inflation less mortgage costs index (CPIX) rose by an annual rate of 6.3 percent in August, down from 6.6 percent in July, had little market effect.
Razia Khan, a Standard Chartered economist, said: "At the moment it is currency strength that is all important.
"With the rand this strong, the next interest rate cut is almost certain to be a full 100 basis points. The outlook for inflation is still positive."
Yields on benchmark bonds, which move in the opposite direction from prices, held firmer ground in early trade after rallying on the back of the rand on Monday.
The yield on the most-traded R153 gained 3 basis points to 9.25 percent. Yields on the short-dated R150 crept up 6 basis points to 8.6 percent.
The euro was changing hands at $1.1497 from $1.1459 late on Monday in New York. It was at ¥127.83 from ¥128.57, £0.6955 from £0.6942 and Sf1.5521 from Sf1.5522.
On the London Bullion Market the price of gold edged up to $387.80 an ounce from $385.50 an ounce on Monday afternoon.
Rand prepares to try out R7 level against weaker dollar
Paciente
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24-09-2003 01:40
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