Rand may have ‘run a little hard’ in falling below R12.50/$ - analyst

Cape Town - The rand may have "run a little hard" in briefly falling below R12.50/$ on Wednesday, according to Andre Botha of TreasuryONE. 

The local currency gained 0.3% against the dollar in early trade on Thursday morning.  At 10:22 it was trading at R12.39/$, after opening at R12.44. 

What direction it will take next is still fairly murky, with analysts citing a number of factors, including US bond yields and important economic data out of the Europe, that could impact its course. 

Rand sentiment on Wednesday may also have been impacted by the grilling that SAA received around its finances in Parliament, and national labour strikes by trade union federation Saftu (South African Federation of Trade Unions). 

Botha said the rand may gain ground on Thursday and head towards the R12.30/$ level. “We expect a little retreat today as the long weekend looms, because the overwhelming feeling is that the rand has run too hard," said Botha. 

"Overall the market is still a little skittish about the US Treasury story, and there could be some knee-jerk [reactions] to the topside, but the feeling is that we could drift back into the R12.30/$'s as the week draws to a close."

Bianca Botes of Peregrine Treasury Solutions argued the local currency was more likely to again test R12.50/$ during US trade on Thursday afternoon. 

“Gold is reaching a near 5-week low as the US dollar continues to climb. Commodity dependant emerging markets are struggling to stand their ground as the commodity markets continue to be soft,” she said.  

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