South Africas rand strengthens as investor sentiment swings

South Africa’s rand strengthened against the dollar on Wednesday, shrugging off losses across all emerging markets on views that the currency has been over-sold after spiralling to its weakest-ever level on Monday.

By 6:17pm, the rand had firmed 0.65 per cent to 13.1085 per dollar from Tuesday’s close of 13.1940.

“The rand was pushed quite aggressively very fast, especially on Monday, relative to the others against the dollar and all the other currencies. So I think some people are getting into the market and just cutting their long USD/ZAR positions,” said Ricardo Da Camara a market analyst at ETM Analytics.

The rand reached a high of 13.0400 earlier before trimming its gains on strong U.S. durable goods data that gave support to the dollar, as the numbers soothed some concerns about a sharp deceleration in U.S. economic growth in the third quarter.

But Da Camara cautioned that there wasn’t a strong improvement in the rand’s performance or appetite for the currency, citing pessimism over emerging markets’ prospect as a weaker China is eroding global economic growth.

“The market is basically signalling that investors are still concerned about the Chinese economic growth, that even with the rate cuts it doesn’t necessarily change the underlying fundamentals,” said Da Camara.

In an attempt to stabilise the Chinese economy and investor sentiment, China’s central bank lowered interest rates and bank reserve requirements on Tuesday for the second time in two months.

Bonds also performed relatively better, with analysts this suggested that some foreigners might be in the market to pick up local bonds at relatively attractive yields.