Rand strengthens and metal prices reach highs

By Staff Writer


From Business Report
October 12 2007


Johannesburg - The rand surged ahead to a 16-month best yesterday after the Reserve Bank raised interest rates, catching investors long on dollars, dealers said.

Rand strength was bolstered by a weak dollar, which in turn lifted gold to a fresh 27-year high, while platinum exceeded its best level set last November.

Reserve Bank governor Tito Mboweni raised the key repo rate by 50 basis points to 10.5 percent in a bid to curb inflation, increasing the rand's yield appeal. The market had been banking on no change.

The local currency was bid at R6.729 against the greenback at 5pm, a gain of 12.4c on the day and just off the session high of R6.715 - its strongest level since June 13 last year, according to Reuters data.

The rand was the best performer against the 16 most actively traded currencies tracked by Bloomberg.

"The market expected no rate hike and he [Mboweni] hiked it," said Bidvest trader Ion de Vleeschauwer. "Everybody was caught long on dollars", which led to a selloff.

A weaker greenback added to the move, he added. "So massive dollar weakness and the central bank chose to hike rates … It is a no-brainer; everybody wants to buy rand."

Commerzbank currency strategist Carsten Fritsch said: "We see some stronger potential in the rand as we expect the dollar to remain under pressure and gold prices to rise."

Precious metal prices benefited as the euro surged above $1.42, rising towards its October 1 record high of $1.4283.

AFP reported that platinum rocketed as high as $1 408.50 an ounce in London, beating its previous best of $1 402.50, while gold leapt as high as $752.04 in late London trade. The moves supported the rand as South Africa is the top producer of the metals.

Government bond yields raced higher after the rate rise, but soon retraced back to near Wednesday's closing levels. The yield on the benchmark R157 bond closed 1 basis point stronger at 8.18 percent, while the R153's yield ended 3 basis points weaker at 8.87 percent.

Recent Articles

Featured Which one should you get first: life cover or a retirement annuity?

Financial planning can be a brain-racking process because it means making difficult decisions such as choosing the most suitable products for you. The one challenge faced by those who are financially constrained is which product to choose: life cover or a retirement annuity (RA).

Read more

Should you save or invest your money?

While saving means putting away cash for future use, investment involves purchasing assets which will yield good returns in the future.

Read more

Retirement annuities compared – pick the one for you

When selecting an RA you must know the type of annuity you are investing in. Retirement annuities are divided into two categories: traditional and new generation annuities.

Read more

Recent tax changes – how do they affect you?

In January this year, various amendments to the Taxation Laws Amendment Bill and the Tax Administration Act were announced. While some changes will benefit you, others could be to your disadvantage. Justmoney looks at how some of the recent changes will impact you.

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Save R100 when you buy a tracker at Takealot

Price: R289
When: Daily
Where: Online

Pamper yourself and partner for less at Bakwena Day Spa

Price: From R999
When: Until 31 July
Where: Hartbeespoort

Pay only R35 for the new Nandos Boujee Bowl

Price: R35
When: Daily
Where: Nationwide