“There is now a possibility that the rand could break through the R13.20/$ and R14.20/€ levels,” said John Cairns, currency strategist at RMB in a company note issued on Thursday.
The rand’s gains on Wednesday were justified by the rally in other currencies. The scope for a break to reach its lowest level against the US dollar since late 2015 is therefore high.
“It’s all about sentiment towards US President Donald Trump. Look for a rand break if he keeps to his business tone and avoids bashing China and Mexico,” Cairns said. “But that’s a big if, particularly if one considers his ‘wall’ and ‘immigration’ comments overnight.”
Cairns added that Trump is supposed to be the “President of Uncertainty”.
“The lack of clarity on policies was supposed to make 2017 a volatile year, yet remarkably the ‘fear gauge’ index of expected equity volatility has dropped to its lowest level since the middle of 2014,” said Cairns.
Rand volatility is therefore also decreasing.
Wichard Cilliers, director and head of currency dealing at TreasuryOne, said if the rand reaches R13.15/$ on Thursday it could “briefly run back to” R12.90/$. “But this is very opportunistic and markets need to be watched closely.”
In the emerging market currency space, the Turkish Lira has dethroned the rand as the most volatile currency.
“But if you think back to what happened politically in Turkey last year,” Cilliers said, “it’s rather perturbing that we as a politically and financially stable nation are still ranked so high in the volatility statistics.”
At 13:00 the rand traded 0.30% stronger at R13.28/$.