South Africa’s rand strengthened almost 0.6% by midday on Tuesday, to break below the key R14 to the US dollar level.
This is the second time the rand has gone below R14 to the greenback this week, after briefly hitting R13.99 on Monday. However, the currency closed at R14.05 on Monday.
But on Tuesday the rand seemed to be buoyed by positive sentiment, hitting a new high of R13.96 to the dollar.
This entrenched its position as the top-performing emerging market currency this year.
The rand last traded at these levels to the dollar back in 2019, before the Covid-19 fallout last year which saw the currency hit an all-time low, breaching the R19 mark.
Market commentators say the rand is riding the emerging markets and commodity wave currently, however, it is also benefiting from positive sentiment around Moody’s keeping South Africa’s credit rating unchanged and President Cyril Ramaphosa’s strengthened position politically over the past week.
“Yesterday [Monday], the South African rand strengthened against the US dollar, after Moody’s left its sovereign ratings unchanged, while an improving local political environment and the global market risk-on sentiment provided further support,” Anchor Capital points out in its morning review issued on Tuesday.
Andre Cilliers, currency strategist at TreasuryONE, issued a cautious opinion earlier on Tuesday morning, questioning whether the rand will break below the R14/dollar level. However, that was when the rand was still trading above R14.
He says momentum is on the emerging market side. He also cited Moody’s decision to keep South Africa’s credit rating unchanged (Ba2 negative) “as they [are sitting] on their hands for the time being”.
Now that the rand is trading below R14 to the US dollar, the big question is whether the currency will close at this level and continue to strengthen this week.
This article first appeared on Moneyweb and has been republished with permission.