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Rand takes a break from roller-coaster ride

Oct 04 2016 08:16

Cape Town – The rand’s roller-coaster ride appears to have paused according to analysts, with the South African currency trading 0.87% stronger at R13.63/$ on Tuesday.

“The wild swings in the rand have stopped, or at least taken a break,” said RMB analyst John Cairns on Tuesday. “Yesterday’s volatility was one of the lowest since the ‘Gordhan letter’ news of mid-August and certainly vastly different from the jittery trade of last week.”

He was referring to Finance Minister Pravin Gordhan’s letter of warning from the Hawks, which is a precursor to an arrest, stemming from an investigation into a spy unit at the SA Revenue Service, where Gordhan was commissioner from 1999 to 2009.

Cairns said markets were worried by the “bounce in the US ISM indicator, which has taken the implied probability of a Fed hike in December to 62% and a renewed flair-up of concerns over Deutsche Bank”.

“The risk-off in equities has been mild but the dollar has rallied meaningfully and it is this specifically which risks pushing USD/ZAR to the topside,” he said.

The rand, which traded below R13.60 at one point on Monday, was helped by comments from Gordhan, who felt the economy had bottomed out, according to Umkhulu Consulting analyst Adam Phillips said on Tuesday.

Phillips sees the rand moving back into the 13.70s. “However, it looks like Gordhan's comments might allow it stay in a narrow range,” he said. “Certainly the 'risk on' that we saw today will be tested.”

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equities  |  rand  |  currency  |  markets
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