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Rand strengthens to its highest level in over a week

As Syria concerns ease.

South Africa‘s rand strengthened to its highest in over a week on Monday with global markets cheered by a delay in possible U.S. military intervention in Syria.

The local unit firmed to 10.1550/dollar on the day, its strongest since Aug. 21, also boosted by upbeat manufacturing data in China, South Africa‘s biggest single trading partner.

Reports that U.S. President Barack Obama had decided to seek congressional approval for a strike against Syria calmed market jitters that had fuelled an emerging market sell-off last week.

Towards the end of Monday’s afternoon session, the rand had come back from the session high as importers used the opportunity to buy dollars.

By 1652 GMT, the rand was at 10.2500 to the dollar, 0.3 percent stronger than its close in New York on Friday.

“We are off the best levels we saw earlier this morning, and there is continued importer demand down at these levels. It’s 30 cents cheaper than it was a day or two ago so you can expect some importer demand down here,” said Ion de Vleeschauwer, a forex trader at Bidvest Bank.

Dealers said trade was slow on Monday with their U.S. counterparts on holiday until Tuesday.

Trade is expected to be cautious this week ahead of interest rate decisions by the Bank of England and the European Central Bank, as well as U.S. non-farm payrolls data on Friday.

Dealers expect a stronger dollar in the sessions leading up to the FOMC in two week’s time, where some market players expect the Fed to announce the start of a reduced bond-buying programme.

South Africa‘s currency is also under pressure from weak domestic fundamentals such as a deficit on its current account and a wave of labour strikes, with miners in the gold sector preparing to down tools on Tuesday.

Workers in the auto and construction sectors have been on strike for higher wages for at least a week.

Vehicle sales data released earlier in the session showed sales dipped 0.3 percent year-on-year in August, adding to concerns about poor economic growth in the third quarter.

The yield on the 2026 benchmark government bond dropped 2 basis points to 8.445 percent in line with the firmer rand.

Data from the securities exchange showed accounts held offshore sold South African government debt for the second straight week last week. 

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