Yesterday the Rand was able to achieve a five-week high against the US Dollar, trading in the region of R8.9549, after advancing for five days. The Rand’s gains against the safe-haven Greenback were largely due to fiscal stimulus issues (relating to Japan and the US) hiking demand for high-yielding assets like South African bonds.
As PSG head trader Ockert van Niekerk stated: ‘With the Bank of Japan driving an aggressive quantitative easing policy there is more cash in the system and we’re picking up investors looking for higher yields. The absence of negative political news has made South Africa an attractive option once again.’
At the current exchange rate 1 US Dollar will purchase 8.9485 South African Rand as of 12:00 pm GMT
Over the course of trade yesterday a net 1.9 billion Rand of South African bonds were bought by foreign investors. This figure follows 5.4 billion Rand of bond purchases last week.
One industry expert noted: ‘At current levels we expect importers to take advantage of [Rand strength.] Initially, we expect decent demand for Dollars as the local market takes advantage of improvement in the Rand.’
Similarly, fixed income trader Thando Vokwana stated: ‘It was again a case of so much money chasing so few assets.’
Vokwana also asserted that now that the Rand has traded below 9 Rand per US Dollar the currency could ‘push even lower’.
Meanwhile, Johannesburg-based Nedbank Group Ltd forecast that although the Rand may be stuck trading in the region of R8.90 – R9.05 today, it could continue to post gains tomorrow, perhaps advancing to R8.85.
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