South Africa’s rand strengthened against the dollar on Tuesday, trading near its strongest levels in three years as the greenback fell broadly.
The rand has been trading firmer than its 200-day moving average since late July and dealers expect further gains for the currency after it broke through resistance at 6,75 last week.
The rand was trading at 6,71 against the dollar, 0,4% firmer than Monday’s close of 6,7415. It hit 6,7049 earlier this session, its strongest level since December 2007.
Market analysts Tradition Analytics said in a note the rand could dip below 6,70, firaming along with other emerging market currencies.
“The fact that commodity prices have ramped even higher suggests that the rand will continue to benefit from the current weakness in the dollar,” it said.
Also supporting the rand is news that South Africa has been invited to join the “BRIC” group of major emerging economies that are seen to have global clout due to their fast pace of growth. The group includes Brazil, Russia, India and China.
Against the euro the rand stood at 8,8080, not far from a 4-year high of 8,7475 hit last week.
Higher inflows into the bond market have boosted the rand in the past 18 months and it has gained about 30% since the beginning of 2009.
Those inflows have pushed bond yields sharply lower across the curve and expectations that domestic interest rates may fall further in the first quarter of 2011 to boost a fragile recovery are also supporting bonds.
The yield on the 2015 bond was down 1,5 basis points to 7,405% and that on the 2026 issue fell by the same margin to 8,38%.
South African stocks are expected to open lower at 0700 GMT. The JSE’s blue chip Top-40 futures contract was down 0,03%.