Rand reaches two-and-a-half-year best as technical points hit
JOHANNESBURG - The rand rose to its strongest since July 2015 early on Tuesday as it crossed crucial technical points and ignited offshore buying interest.
At 06:25am, the rand advanced 0.88% to R12.1950 per dollar, a new two-and-a-half year best, driven by what traders said was a conducive global environment and low liquidity that pushed the currency past the long-time target of R12.2300.
“Once the rand went through the key support level at R12.23, it is likely that a lot of stop-losses were triggered,” said senior trader at Standard Bank Oliver Alwar, adding that low levels of liquidity may have also extended the move.
When trading began, investors were wary of a return of dollar strength after losses for most of the month, as markets price in the risk of policy tightening in other developed nations. In particular, speculation is growing the European Central Bank will start to slow its asset buying this year.
Even so, the rand has remained a key carry-trade target, more so with the local central bank not expected to cut lending rates at its policy meeting on Thursday.
“Investor sentiment towards Cyril Ramaphosa combined with last night’s story about the Asset Forfeiture Unit has added to global optimism. And our yields also provide very good carry for international investors,” currency dealer at TreasuryOne Phillip Pearce said.
A South African court froze R1.6 billion in assets earned by global consultancy McKinsey and a firm linked to friends of President Jacob Zuma, a source at the state prosecutors’ office told Reuters.
Since Ramaphosa’s election as leader of the ruling African National Congress (ANC) and subsequent indications that Zuma would make way for him as president before his term ends in 2019, the rand has strengthened considerably on hopes Ramaphosa will lead an economic recovery.
Bonds were firmer, with the yield on the benchmark debt due in 2026 down 1.5 basis points to 8.495%.
Stocks were higher, with the blue-chip index of companies up 0.3% to 53,591 points and the wider All-Share index up 0.32% at 60,434 points.
The general retailers' index was up 1.4%. Shares of pharmaceutical group Adcock jumped as much as 4% to R62 after it forecast gains of at least 27% in half-year headline earnings per share.