Rand to drift weaker against recovering US dollar

JOHANNESBURG – South Africa’s rand opened softer against the recovering dollar yesterday, and was seen drifting weaker after scaling a near four-month peak on the back of the greenback’s abrupt retreat on Monday, traders said.

At 0655 GMT the rand was trading at 6,29/dollar – about three cents lower than its level in Johannesburg late on Monday when it rose to 6,2122 per dollar, its best level since May 12, according to Reuters data. At that stage the unit had clocked up gains of more than seven percent against the greenback since the end of August, taking it to levels which would normally prompt the central bank to step up its purchases of forex for reserves.But traders said rising inflation on the back of record oil prices would probably prevent the bank from taking aggressive action, or from cutting interest rates again after reducing them by 6,50 percentage points since the middle of 2003.”I don’t think they can do anything with inflation going to between five and 5.5 percent over the next few months.”In any case I don’t think the rand will weaken significantly if the dollar remains weak,” a senior local dealer said.The rand still stands about 10 percent weaker against the greenback this year, but those losses have made only modest inroads into a sustained three-year rally which saw the unit climb off a record low of 13,85/dollar at the end of 2001.Those gains have taken a mounting toll on South African exports, eroding corporate profits and triggering a wave of job cuts – a worrying trend in a country with a jobless rate of more than 26 per cent.-Nampa-ReutersAt that stage the unit had clocked up gains of more than seven percent against the greenback since the end of August, taking it to levels which would normally prompt the central bank to step up its purchases of forex for reserves.But traders said rising inflation on the back of record oil prices would probably prevent the bank from taking aggressive action, or from cutting interest rates again after reducing them by 6,50 percentage points since the middle of 2003.”I don’t think they can do anything with inflation going to between five and 5.5 percent over the next few months.”In any case I don’t think the rand will weaken significantly if the dollar remains weak,” a senior local dealer said.The rand still stands about 10 percent weaker against the greenback this year, but those losses have made only modest inroads into a sustained three-year rally which saw the unit climb off a record low of 13,85/dollar at the end of 2001.Those gains have taken a mounting toll on South African exports, eroding corporate profits and triggering a wave of job cuts – a worrying trend in a country with a jobless rate of more than 26 per cent.-Nampa-Reuters