Johannesburg The rand was stuck in a tight range yesterday near six-year highs against the dollar, but more gains could be on the horizon after the greenback hit a record low against the euro.
Dealers said the rand might first consolidate and even pull back a bit after the recent run, which has brought its gains against the US unit to 15 percent in the year to date. Against the euro its gains are a more modest 8 percent over the same period.
By 5pm the rand was bid at R5.785 to the dollar, 3.24c down on the day after trading in a tight 6c range near its recent string of six-year peaks.
«We are still in a R5.75 to R5.85 to the dollar range and we are looking a bit overdone at these levels. I think if it pops through R5.85 then it will go back to R5.90 pretty quickly,» said one trader.
But technical analysts have said that renewed dollar weakness could take it to R5.66.
In what could prove to be a red rag for rand bulls, the US unit tumbled to a record low versus the euro and a 12-year trough against sterling yesterday as it ran into a fresh wave of selling.
The dollar has slumped to fresh lows during the past two days in the wake of a drop in US consumer confidence and signals that the European Central Bank is not preparing to intervene to weaken Europes currency.
«We believe the risks of intervention are limited for now,» said Calyon analyst Mitul Kotecha.
The euro equalled Mondays record high of $1.3336 but later trimmed gains to $1.3305. The pound rose to $1.9262, its highest level since before Britain was ejected from Europes exchange rate mechanism in 1992.
The dollar has been hurt by concerns about the US current account gap and huge budget deficit, combined with talk that central banks are reviewing the structure of their currency reserves away from the US unit.
There is also a feeling that the US administration is following a policy of benign neglect, allowing the dollar to fall to help improve the current account imbalance.
Government bonds strengthened, with yields once again near historic lows. Traders said the market was still pricing in an interest rate cut of half a percentage point next week, despite strong third-quarter economic growth and high credit demand.
The yield on the benchmark R153 was bid 8 basis points better at 8.18 percent. The shorter-dated R194s yield was bid 7.5 basis points stronger at 7.785 percent.
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