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JOHANNESBURG (Reuters) - South Africa’s rand firmed early on Monday, hurdling the key technical level of 14.50 on its way to a one-year best as signs of a local economic rebound and continued stimulus in the United States lifted demand for the currency.
At 0700 GMT, the rand was 0.5% firmer at 14.4775 per dollar, a touch off the session best of 14.4625 which is its strongest since January 2020.
Crucially, it was the first time since early January the unit broke below the 14.50 technical resistance mark seen as a buy-target by traders.
“The Rand’s path through least resistance has been a much-discussed topic over the past few months with flows by exporters dominating and international investors stuck with piles of free money, which needs to find a high-yielding home,” said Standard Bank’s chief trader Warrick Butler.
“This is not going to change until we either get a diabolical budget from Mboweni (unlikely) or there is a global black swan event which throws us a curve ball.”
Last week, South Africa recorded a better-than-expected expansion in industrial production, up 1.8% in December, while mining output also inched up, suggesting faster economic momentum in 2021 following the coronavirus-induced contraction in 2020.
Finance Minister Tito Mboweni is set to deliver the 2021 budget on Feb. 24, showing better-than-forecast revenue collection.
South African assets often rally in the weeks ahead of the budget, falling thereafter, according to analysts. The rand is up around 1% year-to-date against the dollar.
Bonds were flat, with the yield on benchmark 10-year government issue steady at 8.520%
