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Cape Town – The rand on Thursday returned to levels last seen before Finance Minister Pravin Gordhan was ordered to receive a warning statement by the Hawks.
It broke fresh lows of below R13.50/$ after the US Federal Reserve held off an interest rate hike.
However, while this move helped the rand downwards by around 10 cents against the dollar, the rest of the rand move was due to “outperformance”, according to RMB analyst John Cairns.
“The market had a lingering fear that the Fed could hike yesterday so the lack of move has caused some risk-on gains,” he said on Thursday in a note.
The rand, which “has gained for six straight days and has outperformed for eight straight days” according to Cairns, was trading at R13.47/$ at 08:30 on Thursday, but retreated back to R13.50 by 08:40.
“The USD/ZAR has averaged a 12 cents drop per day, but the pace of decline has been accelerating,” said Cairns. “Sentiment is now swinging behind the shift lower, creating a self-fulfilling prophecy as exporters start to panic and investors jump on the trade.”
He said the rand was trading at levels “seen before the Hawks-Gordhan story exploded”.
Umkhulu Consultants analyst Adam Phillips said emerging currencies “became the star attractions last night with the ZAR now at its best levels”.
“Fundamental watchers of the rand (like me) have probably viewed the above with more circumspect, but technical players will tell you that the crack below R13.79/$ paves the way to R13.17/$.”
The rand’s strong performance comes on ratings day in South Africa.
Most analysts expect the SA Reserve Bank (Sarb) to keep rates unchanged, especially after Wednesday’s CPI data showed inflation slowing to 5.9%.
“We expect the Sarb to keep rates unchanged today but keep up the hawkish talk,” said Cairns. “Yesterday’s 5.9% inflation read supports our view of a drop-off in inflation next year but with inflation to rise above 6% for the rest of this year, it is too early to think that SARB talk will start to reflect a bias for cuts.”
