The SA rand maintains its 10-month high against the US dollar in early trade on Wednesday after gaining a further 30c against the greenback in the past two days.
The currency remained high over several months against the dollar as emerging markets continued to gain against the US currency.
The local currency strengthened to R13.35 to the dollar, the best level since October, as it continued on the rally that took hold in June.
TreasuryOne dealer John Moni explained that this is good news for importers. “They are jubilant with the current R13.40 to the dollar level and should be looking for long-term cover at this stage,” he said.
The Financial Times reported that the SA rand benefited from the results of the local municipal elections – which saw the governing ANC weakened substantially, losing several major metros.
The rand went flat against the pound and euro trading at R17.40 and R14.91 respectively but touched R13.3520 versus dollar earlier in the session, its strongest level since 23 October 2015.
Explaining why this is possibly so, Luis Costa at Citi Bank said that the local election results are “being read as net positive by market participants because it is construed as a signal that president Zuma’s power is dwindling”.
He further noted that tpeople suggest that events like the axing of former finance minister Nhlanhla Nene, in December, are less likely to be repeated. “The implications of this week’s election outcome are market-friendly,” said Costa.
Adam Phillips of Umkhulu Consulting said that weak US productivity numbers for the April to June period also supported emerging market currencies.
According to him also, the market does not even seem to consider what coalitions are going to come about because of the local elections.
“In terms of charts and technicals, there seem to be little support until we get to 13.10 on the ZAR. Given where we have been this year, this is an extraordinary move reminiscent of late December 2001 and all the way through 2002.”
By 9.01am‚ the SA rand was at R13.4283 to the dollar from R13.4142 at the previous close. It was at R14.9623 against the euro from R14.9136 previously‚ and at R17.4984 against the pound from R17.4451 previously.
The euro was at $1.1143, from $1.1118 at the previous close.