Cape Town - The rand raced to a near 20-month high on Wednesday amid positive sentiment towards emerging market currencies and as a mildly hawkish stance from US Federal Reserve chairperson Janet Yellen failed to hold back markets.
By 14:02 the local unit was trading at R13.00 against the greenback. The last time the rand traded below R13.00 was in August 2015.
"A test of R12.80 is a strong possibility," said TreasuryOne.
The rand already broke below the psychologically important R13 barrier twice in Wednesday's session, to R12.98 and R12.99 respectively.
The rand's breach of key levels is an incredibly bullish sign, said RMB currency strategist John Cairn, yet the market shows no sign of running. "As we often say of the rand: the bull walks up the stairs, the bear falls out of the window — i.e. rand gains tend to come slowly."
Cairn said the bias remains for rand gains, both in the short and long term.
"The trend is certainly clear. Global risk-on/Trump-on is a huge help. And yesterday's break of 13.20, a level that has held against repeated tests since August, will inspire confidence even if, as yet, it has not generated huge exporter panic-selling.
"Our expectation remains for slow and unsteady rand gains. Our proverbial bull will make his way up the stairs, but not without knocking over a few things on the way," he said in a note to clients.
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Referring to Yellen's hawkish tone late on Wednesday, he said pricing for a June interest rate hike in the US has risen to 70%.
"Yet Trump-on continues and risk currencies are all gaining on the fresh Wall Street record rather than succumbing to the strength in the dollar that has seen EUR/USD trading under 1.06.
"If there is a short-term concern, it's that the rand is a stark outperformer - always a warning sign."
The rand closed at R13.10/$ in New York overnight.Read Fin24's top stories trending on Twitter: