Rand pulls back off 3-1/4 year low

JOHANNESBURG – South Africa’s rand followed other emerging market currencies stronger yesterday after failing to push through the 8/US dollar mark, and may firm in the near term.

The currency slipped towards the key psychological level on Wednesday on falling commodity prices and worries about the country’s current account deficit, but pulled back overnight. At 0700 GMT, the rand was at 7,8550/US$, a touch firmer than the New York close and around 1,5 per cent stronger than a new 3-1/4 year low of 7,9755/US$ touched on Wednesday.Traders said the market was caught long on dollars on Wednesday and there was good interest to sell a slightly weaker greenback on Thursday.”The market got itself caught a little wrong over the past couple of days.We’ve seen some decent (dollar) selling this morning,” Nedbank trader Danny Pienaar said.The rand was seen trading between 7,78 and 7,90/US$ during the session.Another dealer said the rand was buoyed by other emerging markets pulling back against the dollar and may firm over the short term.”I think the market got itself long dollars overnight …I think it has peaked and should hold lower (firmer) for a while,” the local trader said.The rand crashed through a series of key levels over the past few days on growing concern over South Africa’s economic imbalances, lower commodity prices and a downturn in sentiment towards emerging markets.The central bank has repeatedly warned on the gap on the current account of more than 6 percent of gross domestic product and rising inflation, and markets are expecting interest rates to rise next week.Higher interest rates may impact on economic growth and scare off investors.The concerns have helped the rand lose 20 per cent of its value against the US dollar so far this year.Gold – of which South Africa is the world’s biggest producer – inched up on Thursday after falling nearly eight per cent over the past week.Domestic government bonds recovered after reacting in line with the rand’s previous losses.Nampa-ReutersAt 0700 GMT, the rand was at 7,8550/US$, a touch firmer than the New York close and around 1,5 per cent stronger than a new 3-1/4 year low of 7,9755/US$ touched on Wednesday.Traders said the market was caught long on dollars on Wednesday and there was good interest to sell a slightly weaker greenback on Thursday.”The market got itself caught a little wrong over the past couple of days.We’ve seen some decent (dollar) selling this morning,” Nedbank trader Danny Pienaar said.The rand was seen trading between 7,78 and 7,90/US$ during the session.Another dealer said the rand was buoyed by other emerging markets pulling back against the dollar and may firm over the short term.”I think the market got itself long dollars overnight …I think it has peaked and should hold lower (firmer) for a while,” the local trader said.The rand crashed through a series of key levels over the past few days on growing concern over South Africa’s economic imbalances, lower commodity prices and a downturn in sentiment towards emerging markets.The central bank has repeatedly warned on the gap on the current account of more than 6 percent of gross domestic product and rising inflation, and markets are expecting interest rates to rise next week.Higher interest rates may impact on economic growth and scare off investors.The concerns have helped the rand lose 20 per cent of its value against the US dollar so far this year.Gold – of which South Africa is the world’s biggest producer – inched up on Thursday after falling nearly eight per cent over the past week.Domestic government bonds recovered after reacting in line with the rand’s previous losses.Nampa-Reuters