The rand weakened in early trade on Thursday (25 July) after commodity currencies slipped in Asian trade.
"We tested the bottom of the range on Wednesday (24 July)‚ but failed to break resistance‚ so now we are slightly softer on the back of commodity currencies such as the Australian dollar taking a bit of strain this morning‚" a local foreign exchange trader said.
In morning trade the rand was bid at R9.7732 to the dollar from R9.7613 at Wednesday's close and R9.6742 at the Tuesday's (23 July) close. The local currency was bid at R12.9023 to the euro from its previous close of R12.8765 and was at R14.9775 against sterling from R14.9457 at its previous close. The euro was bid at US$1.3212 from US$1.3194 at Wednesday's close and US$1.3222 at Tuesday's close.
Absa Capital said in its morning report that rand strength persisted on Wednesday (24 July) as more stops were triggered in what remained thin and lack-lustre trade.
"The fact that wednesday's (24 July) local inflation data proved to be softer than expected would have been rand positive from a real interest rate differential perspective and these gains could be consolidated if today's local producer inflation numbers also prove more benign than forecast.
"However‚ although the degree to which the rand has recovered in recent weeks has surprised us‚ we suspect that by now many of the stale long dollar positions have now been stopped out.
"This implies that market is ripe for a fresh bout of rand weakness‚ given that SA's fundamental challenges‚ such as the twin deficits‚ sluggish growth and lingering labour issues have not disappeared. Moreover, global head winds such as the slowdown in China and the prospect of a less accommodating US Federal Reserve‚ are likely to persist in the coming months‚" the bank said.
