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Currencies

28 October 2004 Angelo Coppola

The rand soared to a three month peak against the dollar yesterday after China unexpectedly raised interest rates, prompting speculation that the Chinese unit would not be revalued soon and hitting the greenback.

The rand initially nose dived to R6,2450 to the dollar as market took the view that higher Chinese interest rates would crimp demand for rawmaterials, hitting commodity-linked currencies such as the rand.

But it swung back hard as the dollar retreated, racing to R6,06 - its strongest since July 23 - on a big offshore order as domestic markets would down. By late afternoon the unit was trading at R6,0650 to the dollar.

Traders said a break of R6 now looked possible in the near-term, provided the weaker dollar trend held. The rand was last below that key level in late July, when it scaled a five and a half year peak of R5,87 to the dollar.

The dollar exited lower yesterday, giving up all the gains it made at the start of the session after China surprised the market with its first interest rate rise in nine years.

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