Rand firms on host of factors

Johannesburg – The South African rand was stronger in early trade on Monday, supported by a host of positive factors, including firm commodity prices and news from China of greater forex flexibility.

At 08.50 the rand was bid at R7.4138 to the dollar from R7.4901 at its previous close.

It was bid at R9.2283 to the euro from its previous close of 9.2893 and was at R11.0419 against sterling from R11.1107.

The euro was bid at $1.2447 from $1.2388 overnight.

RMB analysts said in their morning report that China's announcement of a move toward greater currency flexibility yesterday is a mild positive for the ZAR, given the boost to commodity prices, the reduced risk of a trade spat, its negative implications for the USD and the hope for the rebalancing of the global economy.

They added that there are no shortage of rand positives.

"Gold prices are at a new record high and risk aversion is dropping off sharply. It's also interesting that speculators are unwinding EUR/USD short positions quite aggressively.

"On the basis of evidence in the past few years, this is a good leading indicator of a turn in the market. The EUR already made its strongest gains in more than a year last week," they said.

They added that they don't think that the ZAR rally will extend that much further.

"Technically, USD/ZAR7.20/25 will be incredibly difficult to break," they said.

 - I-Net Bridge