Johannesburg The rand held its ground in a tight range near a new six-year peak against the dollar yesterday, with traders keeping a wary eye on the greenback as they brace for the outcome of the Reserve Banks policy meeting later this week.
At 5pm the rand was bid at R5.7188 to the dollar, 8.22c stronger than its previous close in Johannesburg, after retreating to R5.76 at one point.
In a Reuters poll 16 out of 19 analysts said they expected the central bank to keep its repo rate steady at 7.5 percent at its two-day meeting beginning tomorrow, a decision that could propel the unit closer to R5.50 a dollar.
«No rate change suggests further rand strength this week. We could even go to R5.50 or R5.40 to the dollar. Its such a thin market that moves are exaggerated,» said Brait economist Colen Garrow.
The rand was last at those levels in November 1998.
The rand has appreciated by more than 17 percent against the sagging dollar this year, scaling a new six-year peak of R5.6875 on Friday after surprisingly weak US jobs data knocked the dollar.
The rands latest gains, extending a three-year rally, make the benign inflation outlook even more favourable, which may allow the Reserve Bank to cut rates again.
But strong domestic growth, driven largely by consumer demand and a surge in credit, is likely to make the central bank hold its fire ahead of the year-end holiday season, when the nations spending spree reaches a climax.
«If interest rates are unchanged the rand could go to R5.55 a dollar. The central bank is very difficult to predict sometimes,» said a London trader.
«In the meantime, we will probably trade in a range between R5.69 and R5.75, unless there are more moves in the euro.»
At 5pm local time the euro was bid at $1.342, off the record high of $1.3461 reached on Friday after figures showing that US non-farm payrolls rose by 112 000 in November, well below forecasts for a 180 000 rise.
This sparked a fresh wave of selling for the dollar, which has suffered from deepening worries about the mammoth US trade and budget deficits during the past two months.
Domestic bonds strengthened on the back of the rand, with longer-dated maturities making the biggest gains.
The yield on the R194 bond was bid 7 basis points better at 7.81 percent. The benchmark R153s yield was bid 8.5 basis points stronger at 8.135 percent.
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