Rand tests R8.3 support level

Johannesburg - The rand opened slightly firmer against the dollar on Wednesday but looked ripe for a test of the R8.30 support barrier in the trading day.

The rand nudged up just 0.12% to R8.2540 to the dollar at 06:40 GMT, off a R8.2675 close in the New York session on Tuesday.

The currency had looked set to test R8.15 and then R8.11 resistance levels in the last two sessions.

However, the unit pulled back to just below R8.30 overnight on dollar demand from New York investors trying to cover against risky positions ahead of a European Central Bank policy meeting on Thursday.

“We didn’t manage to break the R8.305 (dollar) resistance area in New York trading, and above there, the R8.370 level should offer further resistance,” said Warrick Butler, a rand trader at Standard Bank.

The rand has hit a low of R8.29 so far on Wednesday, making a break of R8.30 within reach.

Investors will also be watching for the Federal Reserve’s monetary policy statement later in the session. The market is expecting further easing to prop up the slowing US economy.

If the Fed disappoints on the expectation, the rand is likely to head for R8.50 to the dollar.

Locally, the July Purchasing Managers' Index, a survey that gives clues about manufacturing activity, is due at 09:00 GMT.

The sector contributes 15% to GDP. Jobless statistics on Tuesday showed manufacturing had shed 44 000 jobs in the second quarter, dampening hopes of a recovery in a sector that has been hard hit by the eurozone debt crisis and a slowing Chinese economy.

Yields on government debt each nudged 1.5 basis points higher to 5.525% on the three-year paper and 7.36% on the 14-year issue.

Treasury will announce issuance plans for Tuesday’s weekly auction at 09:00 GMT.