Rand eyes 6/US$ level

JOHANNESBURG – South Africa’s rand was near an eight-month peak yesterday as gold rocketed to its highest in 25 years, with traders predicting a break of the 6/US dollar level amid mounting demand for commodity-linked currencies.

At 0630 GMT the rand was trading at 6,05/US$ after elbowing its way to 6,0225 overnight – its strongest level since May 9 2005, according to Reuters data. That was the date when the rand last dipped below 6/US$.”All the offshore investment banks were selling dollars in New York last night after gold tested $550,” a local dealer said.”There is support between six and 6,05 but I’m expecting a test of 6/dollar when London comes in today.”If the rand breaks decisively through that obstacle the unit would target 5,90 in the near term followed by 5,60 – a previous 6-1/2 year peak scaled in December 2004, traders say.The local currency is being boosted mainly by broad dollar weakness and surging prices for some of South Africa’s main commodities, particularly gold, which rose above US$550 for the first time in 25 years late on Monday.Bullion was trading at US$545,25 an ounce, after investors booked profits.South Africa is the world’s main producer of the metal, although it only accounts for a small percentage of the country’s exports.Analysts say improved sentiment towards South Africa and growing capital inflows are also generating demand for the rand, one of the world’s most traded emerging market currencies.Figures for car vehicle sales are set to show record growth in the key manufacturing sector again during 2004, reinforcing the positive outlook for Africa’s biggest economy.Government bonds held gains which have propelled yields to record lows.The yield on the most-traded R153 due 2010 was steady at 7,185 per cent while yields on the benchmark R157 bond due 2015 was little moved at 7,35 per cent.Many analysts see some scope for the central bank to trim its key repo again in 2006, as strength in the rand keeps a lid on imported inflation pressures.But the majority believe unchanged interest rates is the most likely scenario as steep global oil prices are still casting a shadow over an otherwise benign inflation outlook.South Africa’s repo rate stands at 7,0 per cent and the central bank will hold its next policy meeting on February 1-2.- Nampa-ReutersThat was the date when the rand last dipped below 6/US$.”All the offshore investment banks were selling dollars in New York last night after gold tested $550,” a local dealer said.”There is support between six and 6,05 but I’m expecting a test of 6/dollar when London comes in today.”If the rand breaks decisively through that obstacle the unit would target 5,90 in the near term followed by 5,60 – a previous 6-1/2 year peak scaled in December 2004, traders say.The local currency is being boosted mainly by broad dollar weakness and surging prices for some of South Africa’s main commodities, particularly gold, which rose above US$550 for the first time in 25 years late on Monday.Bullion was trading at US$545,25 an ounce, after investors booked profits.South Africa is the world’s main producer of the metal, although it only accounts for a small percentage of the country’s exports.Analysts say improved sentiment towards South Africa and growing capital inflows are also generating demand for the rand, one of the world’s most traded emerging market currencies.Figures for car vehicle sales are set to show record growth in the key manufacturing sector again during 2004, reinforcing the positive outlook for Africa’s biggest economy.Government bonds held gains which have propelled yields to record lows.The yield on the most-traded R153 due 2010 was steady at 7,185 per cent while yields on the benchmark R157 bond due 2015 was little moved at 7,35 per cent.Many analysts see some scope for the central bank to trim its key repo again in 2006, as strength in the rand keeps a lid on imported inflation pressures.But the majority believe unchanged interest rates is the most likely scenario as steep global oil prices are still casting a shadow over an otherwise benign inflation outlook.South Africa’s repo rate stands at 7,0 per cent and the central bank will hold its next policy meeting on February 1-2.- Nampa-Reuters