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The rand pauses for breath after a three day tumble

by , 04 June 2014

Today, the rand has consolidated slightly. The local currency has been under severe pressure since last week following the release of some poor local economic data. But after falling for three consecutive days, the rand has halted its decline - for now. Let's take a closer look at what's going on with the rand…

The rand is looking oversold

This morning, the rand managed to hold “steady against the dollar,” says IOL. The local currency found some “support from investors who believed the local unit was oversold after three consecutive days of losses”.

Yesterday, the “rand hit a 10-week low,” reports Fin24. It was under pressure from “negative global risk sentiment and a slew of disappointing local data”. This saw the rand closing at R10.7630 to the dollar in New York.

Sean McCalgan, an analyst with ETM, said “there was nothing new that specifically drove the rand’s losses” yesterday, says iAfrica. He says it’s down to all the negative economic news that’s come out over the last few days.

A wrath of negative economic news has hit the rand hard

This includes the “disappointing trade figures, escalating producer price inflation,” a steep drop in the sales of new vehicles and a contraction in manufacturing output, adds iAfrica.

Analysts at Barclays Africa believe the rand could “weaken all the way to the R11 handle over the near term,” notes BDLive. The rand last hit this level at the beginning of February.

At time of writing, the rand is trading at 10.73 to the dollar, 14.63 to the euro and 17.99 to the pound.

Barclays believe the rand could be in for some more weakness after the European Central Bank meeting tomorrow, adds BDLive.

Time will tell if the rand consolidates further and manages to claw back some of this week’s losses.

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The rand pauses for breath after a three day tumble
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