JOHANNESBURG: South Africa's rand climbed to its strongest level in two weeks against U.S. dollar on Monday, tracking a buoyant euro and breaking through a key psychological technical resistance point.
By 1515 GMT the rand had gained 0.81 percent to 11.9520 per dollar following a volatile overnight session that saw the local unit weaken to 12.1300, before rallying below 12.
The euro was 0.78 percent firmer versus the dollar, as comments by a top Federal Reserve official added to last week's dovish policy message on the timing of rate hikes in the world's number one economy.
"The retracement is a technical move from the very oversold rand and when the euro picks up, we pick up," said Cheslyn Francis, a derivatives trader at Afrifocus Securities.
Francis said rand strength could be short-lived.
"The dollar is still vogue. I don't think the downgrading of Eskom by S&P has been factored in. There are definitely still guys on the sidelines waiting to pull the trigger on selling rand," Francis added.
Rating's agency Standard and Poor's last week slashed state-owned electricity firm Eskom's credit status to junk after the ailing power-supplier suspended its CEO and three senior executives.
South Africa's Reserve Bank is expected to keep interest rates, at 5.75 percent since July last year, unchanged on Thursday after a three day policy meeting that kicks-off on Tuesday.
Economists polled by Reuters expect the bank will have to raise rates eventually because the rand, which has hit 13-year lows against the dollar this year, is likely to come under more pressure as the U.S. starts raising interest rates.
Government bonds also firmed on the day, with the benchmark paper due in 2026 shedding 9.5 basis to a three-week low of 7.69 percent.
Comments
Comments are closed.