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Johannesburg - South Africa's rand advanced to a fresh three-year high against the dollar on Thursday and is poised for further gains in a thin market dominated by exporters.
The rand climbed to R6.5975, its strongest since November 2007, and could target the R6.40's in the next few weeks, especially if it stays below R6.65.
By 08:44 it was trading at R6.6060, 0.36% stronger than Wednesday's New York close of R6.63.
"We expect the rand to strengthen further," said a dealer at a local bank, seeing the rand between R6.58 and R6.65 in the session.
"The market is looking to sell dollars on rallies around the R6.67/68 area. With the way the rand has strengthened, as an exporter you a worried but importers are happy to sit out," he added.
The rand has firmed by over 30 percent to the dollar since beginning of last year. In response, the central bank has increased its reserves in an effort to offset the gains.
Peter Attard Montalto, emerging market analyst at Nomura International said the central bank "could have put up a much better fight" in the past few sessions to counter rand appreciation.
While a stronger rand will keep inflation in check, it will weigh on exports and the broader economy and support the case for another rate cut.
Rates have already fallen by 650 basis points since December 2008 and expectations of another rate cut are boosting the bond market.
The yield on the 2015 bond (ZAR157) was down four basis points at 7.38% and that on the 2026 note (ZAR186) fell three basis points to 8.365%.
On the bourse, the stock futures pointed to a flat start.
The JSE's blue chip Top-40 March futures contract slipped 0.02% before the 09:00 start of trade.
The rand climbed to R6.5975, its strongest since November 2007, and could target the R6.40's in the next few weeks, especially if it stays below R6.65.
By 08:44 it was trading at R6.6060, 0.36% stronger than Wednesday's New York close of R6.63.
"We expect the rand to strengthen further," said a dealer at a local bank, seeing the rand between R6.58 and R6.65 in the session.
"The market is looking to sell dollars on rallies around the R6.67/68 area. With the way the rand has strengthened, as an exporter you a worried but importers are happy to sit out," he added.
The rand has firmed by over 30 percent to the dollar since beginning of last year. In response, the central bank has increased its reserves in an effort to offset the gains.
Peter Attard Montalto, emerging market analyst at Nomura International said the central bank "could have put up a much better fight" in the past few sessions to counter rand appreciation.
While a stronger rand will keep inflation in check, it will weigh on exports and the broader economy and support the case for another rate cut.
Rates have already fallen by 650 basis points since December 2008 and expectations of another rate cut are boosting the bond market.
The yield on the 2015 bond (ZAR157) was down four basis points at 7.38% and that on the 2026 note (ZAR186) fell three basis points to 8.365%.
On the bourse, the stock futures pointed to a flat start.
The JSE's blue chip Top-40 March futures contract slipped 0.02% before the 09:00 start of trade.
