Rand rally impressive as it tops a 2-year high
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JOHANNESBURG - THE rand yesterday continued its impressive rally, rising to an over 2-year high to touch R13.68 in intraday trade against the dollar before moderating 0.02 percent to R13.77 by 5pm.
This was the rand's highest level since February 2019, aided by the dollar languishing near four-month lows despite its steady gains against the major currencies.
The rand has been supported by the Fed's dovish stance, rising commodity prices, the positive outlook delivered by the SA Reserve Bank last week and after credit rating agencies affirmed South Africa's sovereign rating and outlook.
TreasuryONE's Andre Cilliers said conflicting views on whether the rise in inflation in the US was transitory or not, as well as comments from senior Fed officials that the discussion around tapering needed to begin, saw the dollar fight back.
Fed Governor Randal Quarles signaled on Wednesday that he was open to taper talks, echoing similar comments by vice-chair Clarida on Tuesday who indicated that the Fed may start “talking about talking about tapering.”
“The local currency is currently holding on to these gains while it has firmed quite strongly against both the euro and pound as well,” Cilliers said.
“A break of R13.75 could see further strength for the rand, however, we are getting into overbought territory and probably due for a correction or some stability.”
Meanwhile, stocks at the JSE rose to near two-week high as global sentiment was lifted by a better-than-anticipated jobless claims report and encouraging GDP data in the US.
The JSE All Share Index closed 1.26 percent high to 66 940 index points, its highest since May 18 as investors welcomed US President Joe Biden's move to propose a $6 trillion budget in 2022.
FXTM's analyst Lukman Otunuga, however, said the financial markets were cautious ahead of US inflation data.
Meanwhile, South Africa could soon be moving to an adjusted level 2 of the lockdown as members of the Covid19 Ministerial Advisory Committee warned that tighter restrictions were needed ahead of a third wave.