The rand broke through the R14/$ ceiling on Tuesday as the emerging market currency made its fourth straight day of gains against the dollar.
“The last time we were below R14/$ was on 8 September, but that for a very short time,” said Umkhulu Consulting analyst Adam Phillips on Tuesday. “I think the normal monthly forex offering from exporters, a tiny helping hand from offshore yield players (bonds also had a good day), selling of dollar at the end of the third quarter and concerns as to what to expect from the Federal Reserve Bank meeting topped the list.”
By 09:00, the rand was up 0.32% at R13.99/$, 0.35% up at R18.23/£ and 0.34% up at R15.63/€.
“The rand is running hard, making its fourth straight day of gains against the dollar yesterday and its sixth straight day of relative outperformance,” said RMB analyst John Cairns on Tuesday. “As we set out yesterday, you might question if the gains are justified but there is no reason to doubt, or try and fade, the trend.”
Phillips said South Africa’s political situation might be calming down. “I think it would be wrong to ignore what has gone on,” he said. “(Finance Minister Pravin) Gordhan has remained in the saddle in terms of the recent announcements on SAA and I think we have to assume he is going to be around to table the finance ministry’s medium-term budget in late October.
“However, it remains to be seen if he is around when the rating agencies make their decisions. I think that could be a good reason for the strength in the rand because exporters have been holding on, wondering what has changed.
“They would be right in their thinking and all it took was for a few to sell and others were forced to. That is why I believe the recent moves are a short-term phenomenon.