Currencies (22.6.04)

The rand broke below R6,30 to the dollar yesterday afternoon for the first time since April 14 on the back of offshore dollar sales.

Currency traders attributed the local unit's strength to a continuation of Friday's rally, which sparked by the release of worse-than-expected US current account figures.

In late afternoon, the rand was quoted at R6,3076 to the dollar from a close of R6,3908 on Friday and R6,5213 on Thursday. It traded earlier at an intraday best level of R6,2850.

It was quoted at R7,6089 tot he euro from a previous R7,7280 and at R11,5470 against sterling from Friday's R11,7530.

The rand's strength is just a follow through from Friday. Currency traders have seen local demand all the way down (firmer), but there are plenty of offshore sellers. There is just more dollar supply than demand.

He said that the rand had started to strengthen on Friday when the dollar tumbled following the release of the US data, which showed a record current account deficit of $144,9bn for the first quarter, but that technicals had taken over when the rand broke a key point at R6,43.

While the higher gold price was helping the rand to an extent, the trader noted that the rand had firmed against the Australian dollar, which also benefits from strength in gold.

The dollar held onto modest overnight gains against its European rivals yesterday and recouped losses against the yen as markets began what dealers are calling a countdown to next week's expected hike in US interest rates.

After selling off on Friday on news that the first-quarter US current account gap - the broadest measure of the US's trade with the rest of the world - had widened to a record $144,9bn, the dollar managed to unwind those losses yesterday.