South African Rand Grows Firmer


South Africa’s rand was firmer on Friday, the last trading day of the year, as continued volatility in low liquidity conditions saw the currency touch and then retreat from levels near its 2-1/2 year best.

At 1100 GMT, the rand was 0.8 percent firmer at 12.3100 per dollar, with technical buying kicking-in first at 12.4000 and then at the 12.3300, both recent support levels.

The unit is now trading below its 200-day moving average, a confirmation of the firmer price trend likely to spur further buying interest into the new year.

The rand, along with fellow emerging markets currencies, has benefited from the dollar shedding more than 9 percent in 2017 despite the U.S. Federal Reserve delivering three rate hikes.

The currency is about 13 percent firmer than it was in January.

Since Cyril Ramaphosa was elected president Jacob Zuma’s successor as head of the African National Congress (ANC) last Monday, the rand has gained close to 10 percent against the dollar, making it one of the best performers among EM currencies.

The rand largely ignored the Constitutional Court ruling that parliament had failed to hold Zuma to account over a scandal related to state-funded upgrades to his home, and must launch proceedings that could remove him from office.

Having ended Thursday’s local trading session on the back foot as investors took profits on the rally that carried the unit to 12.2400, its firmest since June 2015, the rand regained momentum in offshore trade, racing to a session best 12.2825 overnight.

Momentum indicators showed the rand on the day had strayed into oversold territory, and traders said this partly explained the rebound.

Bonds were weaker, with the yield on benchmark paper due in 2026 up 1.5 basis points to 8.585 percent.

South African main stock indices ended 2017 between 17.5 and 19.65 percent higher, mirroring global rallies fueled by increased optimism about the global economy.

But they remain short of the record peaks scaled in November, brought back to earth by a collapse in the share price of market heavyweight and retailer Steinhoff following its disclosure of accounting irregularities and the exit of its chief executive.

Technical factors also weighed on the market as momentum indicators tracked by analysts consistently showed the market was overbought each time a new high was reached.

On Friday, then the market closed at midday ahead of the New Year holiday, the benchmark Top-40 index ended the session 0.89 percent higher at 52,533.04 while the wider all-share index added 0.94 percent to end the year at 59,504.67.

Source: Reuters