The rand broke below the psychological R12/$ level this week and analysts expect it to hold onto its gains.
The local currency opened at R11.96 on Friday morning and was trading at R12.02 to the greenback by 13:37. Analysts from NKC Economics expect the rand to trade within the range of R11.85 to R12.05 for the remainder of the day.
“A rally in commodity markets is assisting all emerging market currencies, with the rand gaining over 0.6% against the greenback,” said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions.
Andre Botha, currency dealer at TreasuryONE is also of the view that the rand will hold at the R12/$-level.
“We expect the rand to trade in a very narrow range today as the market waits for any direction giving event or data.
“The rand needs to break the R 11.90 level or the R12.05 level and sustain the break for the rand to move into a new trend,” he said.
The rand strength was also helped by positive inflation figures for March, according to NKC Economics.
This week, StatsSA reported CPI coming in at 3.8% for March.
In a market update issued on Friday RMB senior economist Mpho Tsebe noted comments Reserve Bank Governor Lesetja Kganyago made on the inflation rate. Kganyago expects inflation to anchor at 4.5%, which means the 3.8% inflation rate in March is unlikely to lead to interest rate cuts.
“This is because prices pressures are expected to have ticked higher in April, the VAT increase taking effect,” Tsebe explained.
Globally the US Federal Reserve Bank (Fed) delivered a “hawkish outlook” and steady hikes are expected for the rest of the year, said Botes.
“Cleveland Fed President Loretta Mester supports the case for gradual interest rate increases, as it places monetary policy officials in a better position to address potential risks.
“She said that the Fed could speed up or put brakes on its policy path, should inflation risks or trade and geopolitical tension risks materialise,” Tsebe explained.
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER