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Johannesburg - A firm rand gained further momentum by
midday on Thursday testing a key technical level of R7.27 versus the dollar,
having broken through the psychological barrier of R7.30 against the dollar.
A local dealer noted that the euro was also putting pressure on the dollar, fuelling rand
strength.
At
11:50 local time the rand was bid at R7.2767 to the dollar from R7.3427 at Wednesday's close. It
was bid at R9.5379 to the euro from R9.5367 before and at
R11.3924 against the
sterling from R11.4306 at its previous close.
The euro was bid at $1.3078 from $1.2993 overnight.
The dealer said: "Current trade indicates that the rand wants to get stronger. The R7.30
figure against the dollar is a big level, but it's more of a psychological
barrier, while R7.27 is a key technical level. If we break through there we could see
further rand strength. The euro is also putting pressure on the dollar."
He
said that local producer price index (PPI) data indicated a slim chance of a further rate
cut.
South Africa's PPI registered growth of 9.4% year-on-year (y/y) in June compared with 6.8%
y/y in May, Statistics South Africa (Stats SA) data on Thursday showed.
The PPI increased 4.0% on a monthly basis after May's monthly increase of 0.2%.
The PPI was expected to have reached 7.5% y/y, a survey by I-Net Bridge found. Forecasts
among the 10 leading economists surveyed ranged from 6.5% y/y to 8.6% y/y.
Dow Jones Newswires reported that renewed fears of a double-dip recession in the US pushed the
dollar lower and finally helped the euro to establish itself above $1.30 on
Thursday.
However, there is little sign of further upward momentum for the single currency as the
market waits to see what the US second-quarter GDP figures are like on Friday.
The latest
knock to confidence in the US recovery came after US durable goods showed an unexpected
1.0% fall last month and the Federal Reserve's latest Beige Book gave a
fairly tepid assessment of the economy.
The data led
to a decline in US Treasury yields as well as fall in investor support for the US
currency.
- I-Net Bridge