Rand dips below R12.80/$

Cape Town - The rand strengthened to an 18-month high to under R12.80/$ on Thursday afternoon following a decent budget, dollar weakness and an easing of French political risk.

The rand hit R12.79/$ in late afternoon trading and by 17:15 the local unit was trading at R12.82 against the greenback, R13.56/€ and R16.04/£.

The last time the rand traded below R12.80 was in August 2015.

RMB currency strategist John Cairns however cautioned that the market appears to have run too far. 

He said the budget was decent as it held the line on deficits, debt and expenditure that were drawn in the Medium-Term Budget Policy Statement in October last year, but there were some negatives.

"An absence of detail on reforms is disappointing and both bonds and equities will not like specific proposals, the switch to greater local bond supply and higher personal and withholding taxes respectively.

"Nevertheless, the budget appears to have done enough to appease the rating agencies and, absent a negative political shock, we now think that South Africa will avoid a sub-investment grade downgrade this year."

He said the dollar was hard hit by Federal Reserve worries about a “substantial appreciation” in the currency.