Cape Town - The rand has dipped below R16 to the US dollar for the first time since 6 January on several drivers, including an aggressive interest rate hike on Thursday and surprisingly positive trade data on Friday.
"The definite drivers for the ZAR strength against the US dollar were the rate hike, month end sellers, nervous dollar longs that had to close out and some fantastic trade balance data," Adam Phillips of Umkhulu Consulting told Fin24 on Sunday.
The rand firmed to R15.89/$ in overnight trade in New York on Friday, a far cry from the R17.99 reached on 11 January.
South Africa's trade surplus widened to a surprise R8.22bn in December from R683m in November. The expectation was for a surplus of R1.8bn.
Phillips said economists will argue that SA always has a good trade balance in December, but anything in the positive territory shows SA is benefiting. "A positive number coupled with lower government borrowings would certainly help the ZAR in 2017 and beyond."
Phillips reckons the trade balance enabled the local unit to carry on strengthening in New York, "along with a buoyant end to the week on Wall Street that saw a 2.47% gain. The US GDP numbers were broadly in line and oil seems to be steadying above the psychological $30 a barrel".
"I had a short term move down to 16.00 with some consolidation, so I do think importers will come in tomorrow bargain hunting from levels more akin to the end of last year. I think some thin US volume may have pushed it down too much," he said.
Phillips, an independent treasury specialist to corporates, said from here, all eyes and ears will be on Finance Minister Pravin Gordhan's budget speech on 24 February.
"The rating agencies will have been pleased by the hike, but now it is the structural side they will look at. Will Gordhan blow his own trumpet on that day? If we do see the ZAR continue to trade below 16.00 in the near future it will be because the currency has been oversold, steady oil and commodity prices and equity markets continuing to rebound.
"If we continue to see better trade balance data this will also help the ZAR. The rate hike had the desired affect, but I would caution about seeing the ZAR continuing to fly."
Forgetting #Nenegate, Phillips said "we would still be lower now due to international events alone, from the close on 31 December".
The rand took a beating following the announcement on 9 December by President Jacob Zuma that he had replaced Nhlanhla Nene with unknown ANC MP David van Rooyen, only to replace him three days later with Nene's former boss Gordhan. Gordhan brought some stability to the currency market, but external factors like growth worries in China, the commodities price slump and dollar strength kept the rand in check. On 20 January the currency was still trading at R16.89/$.
Phillips said picking a level for importers is going to be difficult, while these are still good rates for exporters. "With that in mind it is the latter that we need to watch, along with any news from rating agencies. The chances of such volatility until late February seem to be a great deal smaller then we started January in such a panic.
"I doubt we will see a nervous Japanese seller tonight trying to buy USD, after seeing their own rates pushed into negative territory. The move in the ZAR is a relief, but I would caution against thinking that the ZAR can continue to strengthen in double cent moves like 2001. It is very different now."