Rand rose to a two-year high yesterday before retreating 0.03 percent slightly to R13.52 against the US dollar in early trade as investors cautiously awaited domestic economic growth figures.

The rand touched R13.42 early yesterday as it benefited from global growth expectations which continued to underpin positive sentiment and the risk-on environment.

The domestic currency pushed below R13.50/$ last week, close to its highest level since February 5, 2019.

The dollar came under pressure last week after a weaker-than-expected US jobs report tempered expectations of an earlier monetary policy tightening by the US Federal Reserve.

Anchor Capital’s co-chief investment officer Nolan Wapenaar said the sharp strength in the rand had occurred in the absence of any meaningful new information for the market.

Wapenaar said perhaps it was just South Africa’s high domestic interest rates which made the rand attractive at the cost of holding dollars.

“Our view is that the backdrop of a supportive commodity cycle and global positivity towards economic growth is pushing the rand stronger than our fair-value range,” Wapenaar said. “Our fair range of R14.50-R15/$ seems some way off at present and it is feeling more improbable to us that the rand will weaken to that level, at least in the near term.”

Statistics South Africa (StatsSA) will today release the results of the gross domestic product for the first quarter of 2021 following significant growth in the last quarter of 2020.

Wapenaar said the rand was one of the world’s most volatile currencies and, at some point, it will trade within their fair range once again.

The rand has reached a low as last seen in early 2019 on the strength of the trade account, as South Africa’s exports continue to benefit from the commodity price boom.

South Africa’s terms of trade is strongly positive, as exports continue to see their prices increase substantially more than imports.
Investec’s chief economist Annabel Bishop said the rand has been targeting the R13.40 mark, with the substantial strength driven by the combined favourable global market sentiment and South Africa’s strong trade performance. But she said longer-term risks persist for volatility as the dollar was likely to see some strength from current levels as the Fed eventually reduces its bond-buying programme.

“The rand’s strong run since R19.35/$ essentially a year ago, to R13.41/$ this month is not expected to be replicated, as the domestic currency is at strong risk of weakness as the US tapers quantitative easing.

“The rand retains increased sensitivity to key US data releases, and we continue to believe that it will not be unscathed from a financial market taper tantrum.”


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