Rand powers through R17/$ again, 'could strengthen further depending on US dollar performance'

The rand has breached R17/$ again, helped by some weakness in the US dollar.

The local currency strengthened below this mark briefly in November, to reach R16.95/$ following the tabling of the National Treasury’s Medium-Term Budget Policy Statement (MTBPS).

On Thursday, the rand reached R16.97/$ in late afternoon trade, after an earlier best of R16.96.

There is actually an inherent rand strength at this point, remarks Andre Cilliers, director and currency strategist at TreasuryONE.

He points out that it is not only against the dollar that the currency is gaining, but across the board.

"If you look at the cross currencies like the pound, the euro and so forth, you see the rand is gaining there as well."

Also auguring well for the continued strengthening of the currency is Moody's upcoming announcement on our credit rating, forwhich there is an optimistic outlook, Cilliers says.

In general, thereis positivity around domestic and broader developments for South Africa - 'We're still attracting bond flows into the market because of our high interest rates as compared to our trading peers. The G20 went well, and commodity prices are still at an elevated level.'

Then there are market expectations ahead of next week's Federal Open Market Committee (FOMC) meeting that the US will announce another interest rate cut.

"Hence the US currency is losing a little bit of its colour. The Dollar Index is below 100, so that weakening is also obviously assisting the rand in its strength at this point."

And if the dollar breaks 117 and moves closer to the 118 level against the euro for instance, the rand could rally to around 16.75/$, Cilliers says. "It is important, however, that we break R17 and trade sustainably below that level for a day or two."

Listen to Cilliers' analysis in the interview audio at the top of the article