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Johannesburg — The rand scaled a new four-month high yesterday, driven by sustained dollar weakness and fresh comments by the government that it would not intervene to curb its strength. Government bond yields dived to record lows as the bullish rand raised hopes of an interest rate cut next month. By 5pm the rand had firmed 6.5c on the day to R5.877 against the dollar. It was just off R5.87 — a level it touched on July 19 and its best level since January 1999. «We’ve been dominated by the weaker dollar,» said Leon Myburgh, an analyst at Barclays. The dollar fell to a record low against the euro for a third consecutive day and hit multi-year lows versus all other major currencies as broad dollar selling gathered momentum. Warnings from Japanese and European policy makers did little to halt the greenback’s slide, which has been driven primarily by concerns over the US current account deficit and the market’s belief that Washington is happy to see a weaker dollar. The dollar fell to a record low of $1.3237 a euro. In addition to broad dollar weakness, analysts said the rand had received a boost from comments by finance minister Trevor Manuel, who repeated that the government would not intervene to try to halt its strength. «The only way we can try to depreciate the rand against the dollar now is if we are going to behave completely stupidly and overturn all the decisions [we have made] over a long period,» Manuel told the country’s clothing and textile workers’ union. His remarks come on the heels of Wednesday’s comments by Reserve Bank governor Tito Mboweni that the bank would continue to build its forex reserves at a measured pace and would not try to influence the rand’s exchange rate. Analysts expect the rand to test the key R5.85 a dollar level. «A breakdown through R5.88 a dollar would bring this year’s low of R5.85 [bid] quickly into target,» said David Ross, an analyst at 4Cast in London. «While this level might be considered a natural point at which to take profits, the dollar backdrop may deter the market from doing so to a significant degree.» The strong tone spilled over to the bond market.
By 5pm the yield on the R153 bond had rallied 8.5 basis points to be bid at 8.195 percent. The yield on the most-traded R194 was 2 basis points stronger at 7.81 percent.
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