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Currencies (14 June 04)

13 June 2004 Angelo Coppola

The rand was steady at firmer levels on Friday after a dramatic offshore rally that caught most traders by surprise, despite relatively hawkish comments on interest rates from the central bank.

RMB Asset Management reports that the rand was trading at R6,5350 to the dollar in late trade - a touch firmer than its opening levels, but off its overnight peak of R6,3950, which was its strongest since June 2.

Traders said they expected the unit to range between R6,42 to the dollar and R6,52 after rallying 4% following the South African Reserve Bank's monetary policy meeting on Thursday. The central bank kept its repo rate steady at 8% as expected.

Analysts have been predicting an orderly depreciation in the domestic unit this year, as interest rates in many South Africa's main trading partners rise, narrowing the yield differential and reducing the rand's appeal to spectators.

But the unit had defied expectations, and is now about 2,5% firmer against the dollar in the year to date following gains of 28% last year and 40% in 2002.

The dollar rose to a three-week high against the euro and edged up 1% against other major currencies on Friday after a Federal Reserve official stoked expectations that the central bank could be aggressive in raising US interest rates.

St Louis Fed president William Poole said on Thursday that the Fed should raise rates more quickly than the market expected if inflation sped up. He said delaying Fed action would not help the US economy.

RMB Asset Management reports that the rand was trading at R6,5350 to the dollar in late trade - a touch firmer than its opening levels, but off its overnight peak of R6,3950, which was its strongest since June 2.

Traders said they expected the unit to range between R6,42 to the dollar and R6,52 after rallying 4% following the South African Reserve Bank's monetary policy meeting on Thursday. The central bank kept its repo rate steady at 8% as expected.

Analysts have been predicting an orderly depreciation in the domestic unit this year, as interest rates in many South Africa's main trading partners rise, narrowing the yield differential and reducing the rand's appeal to spectators.

But the unit had defied expectations, and is now about 2,5% firmer against the dollar in the year to date following gains of 28% last year and 40% in 2002.

The dollar rose to a three-week high against the euro and edged up 1% against other major currencies on Friday after a Federal Reserve official stoked expectations that the central bank could be aggressive in raising US interest rates.

St Louis Fed president William Poole said on Thursday that the Fed should raise rates more quickly than the market expected if inflation sped up. He said delaying Fed action would not help the US economy.

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