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Rand hits fresh 2-week high

Sep 07 2012 09:36 Reuters

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Johannesburg - The rand hit a fresh two week high against the dollar on Friday, extending the previous session’s gains as model fund traders sold the US currency for rand. 

Risky assets rallied on Thursday after the European Central Bank confirmed an unlimited bond-buying program to help stem the euro's debt crisis, pressuring traditionally safe haven assets such as the dollar.

Investors who had shorted the rand for the past month sold euro and dollars to get back into the domestic currency, which was the biggest gainer early on Friday in a basket of 20 emerging market currencies traded against the dollar and tracked by Reuters.

The rand rose to a session high of R8.2605 against the dollar, off a close of R8.3010 in New York on Thursday, and well below a key resistance level of R8.32 broken the previous day.

Dealers who trade model funds normally come in at 06:00 GMT and buy or sell according to where the currency closed the previous night.

“A close lower will indicate a dollar sell trigger to them and that’s what we’ve just seen this morning,” said Standard Bank currency trader Warrick Butler.

The rand also made gains on the euro as dealers sold euro/dollar and then dollar/rand to get back into the local unit, causing the rand to retrace from its recent fall.

“A close below R8.15/dollar, which is not our preferred bias, would signal a bigger correction than we have been allowing for,” said Judy Padayachee, technical strategist at Absa Capital.

The unit was up 0.2% on the euro, near a two-week high hit on Thursday evening. Euro/rand has lost 25 cents since last week Friday, dropping to R10.45 in this session.

“For euro/rand, we reiterate our call for temporary stalling to target R10.40, and potentially R10.35,” Padayachee added.

The rand was unaffected by better-than-expected central bank reserves data at 06:00 GMT, dealers said.

Yields on government bonds were up 2.5 basis points each to 5.43% on the 2015 note and 7.375% on the 2026 bond.


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bonds  |  rand  |  markets
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