The rand strengthened almost 1.5% against the dollar in early trade on Friday as the US currency continued its slide on poor inflation data.
The rand was trading 1.1% firmer at R14.47/$ by 09:49 on Friday after hitting an intraday high of R14.44 against the greenback. The unit was also one of the best performing emerging market currencies in the previous session on the back of dollar weakness and lower US bond yields.
"US treasury yields were lower, with the 10-year yield down to 3.13% and the 30-year yield down to 3.31%. The equity markets continued their correction as the Dow slipped by 2.13% and the S&P down by 2.06%. Gold benefited from a safe haven perspective to be trading at $1 220.00 this morning," commented Wichard Cilliers, head dealer at TreasuryOne, in a morning note.
The US market has now lost 7% since its all-time high on 3 October, according to Adam Phillips of Umkhulu Consulting.
Locally, the currency received some support from Tito Mboweni's appointment as finance minister and slightly-better-than-expected manufacturing production data for August.
"It’s been an interesting week for the SA market, as we embrace our newly appointed Minister of Finance Tito Mboweni. The rand celebrated the news of former Minister Nhlanhla Nene's replacement after uncertainty once again tainted government. This victory was, however, short-lived, as reality set in and quickly corrected the overreaction to the news," said Peregrine's Bianca Botes.
Traders, however, are focused on the Moody’s credit rating announcement expected on Friday evening.
"For us in SA it's all about the Moody's announcement tonight... so this will lead to a nervous session, especially as gold has performed very well. On a more normal day, one would expect a better performance in the ZAR given where gold is.
"However, I am sure there will be a wall of import buying just below R14.50. The Moody's announcement is very important. We are currently at Baa3 (stable) and don't want to see this cut," said Phillips.
NKC Africa Economics expects the currency to trade between R14.35/$ and R14.70/$ on Friday.
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