Rand struggles vs US dollar

South Africa's rand stayed on the backfoot against the dollar on Thursday after weakening to a near 2-week low the previous day, weighed down by increased importer demand following its recent highs.

The rand touched a session low of 6.8055 before coming back slightly to 6.7815 by 08:50 SA time, just 0.14 percent firmer than Wednesday's close at 6.7910.

The local unit fell to 6.82/dollar on Wednesday, its weakest level since March 31, in what some traders said was a natural correction after the rand's attempt to revisit last December's highs around 6.60.

“This whole week there's been huge importer demand, I think companies have seen that the rand did try to go to 6.60's before in December, and we retraced quite hard from those levels, going to about 7.15,” said Ion de Vleeschauwer, chief dealer at Bidvest.

“There's also been talk that the Reserve Bank has again been quite aggressive in trying to weaken the currency at (firmer) levels and that might have caught the market a bit on the short side of dollars”.

Traders said the next crucial technical level for the local unit would be 6.85/dollar - a breach of that could quickly open up 7.00.

Government bonds were also weaker, with the yield on the 2015 note adding two basis points to 7.78 percent while that for the longer-dated 2026 bond rose by 2.5 basis points to 8.78 percent.

Absa Capital said the 2015 and 2026 bonds were caught in the middle of their multi-month ranges and that the risks were for some stalling over the next day or two, before trending higher.

“Bigger picture, we continue to favour further unwinding of the overbought conditions from last week. That said, while the bear trend initiated in (the second half of 2010) prevails we are targeting 8.20 percent for the R157 and 9.05 percent for the R186 in the weeks ahead,” the investment bank said in a research note. - Reuters