Rand, the major currency of South Africa has experienced the biggest advance in last 11 months after technical indicators suggested that the slump of the currency to a 4-year low in last month was kind of overdone. Apart from that, the Purchasing Managers’ Index of South Africa has topped estimates as well.
The exchange rate went down by 11% against USD in May, thereby pushing the relative strength index of last 14 days to a high figure of 86. Overall, the Relative Strength Index had been above the 70 mark since 20th May, before dropping down to 67 on today.
Incidentally, 70 denote a threshold which signals that a particular currency is oversold. Rand was the most oversold major currency in the world for the last month and on today; it experienced a surge of 2.5% against USD. Rand is currently priced at 9.8443 per USD, thereby marking its biggest value on closing basis since 29th June, 2012.
According to the Head of the Strategic Research Department at Nedbank Group Ltd., Mohammed Nalla, Rand has been oversold for a long period of time and currently, the same is sort of hoping to get some consolidation. According to predictions of Nalla, Rand may extend gains if it somehow is able to breach the level of 9.85 per USD. Incidentally, this level is seen as a significant resistance level for gaining further.
Yields on the benchmark 10.5% bonds which are due in December, 2026 experienced a decline of 14 basis points and the same is currently at 7.46%. Thereby, Rand has stemmed increases of 5 straight days. On the other hand, the Purchasing Manager’s Index or PMI of South Africa has declined to 50.4% in May from a value of 50.5% in April. Thereby, PMI has stayed above the 50 level which indicates that the economy is expanding. The figures are actually better than the estimates set by the analysts of 49.9. Apart from that, the sales of auto parts increased 7.5%, thereby defeating the estimate of 5.8% set by the analysts.
In 2013, till this date, Rand has declined by 14% as there are concerns over the labor disruptions throughout the country. Many feel that the output in the mining industry will be cut down due to the same. Mining output accounts for more than 50% of the total exports of South Africa.