Rand Fails to Breach Resistance Level, Slips on Importer Demand

The rand weakened for a second day against the dollar as importers took advantage of a rally that drove the currency to a three-month low to buy foreign exchange.

South Africa’s currency retreated from the 6.6895 per dollar rate technical analysts regard as a resistance level. It declined as much as 0.6 percent to 6.7487 per dollar and traded 0.1 percent down at 6.7205 as of 4:17 p.m. in Johannesburg, paring its gain since March 17 to 5.3 percent. The rand advanced 0.1 percent to 9.5310 per euro.

The currency of Africa’s biggest economy appreciated over the past three weeks as commodity prices rose, boosting the value of the country’s raw material exports. The benchmark stock index has surged 6.3 percent in the same period, led by mining companies including Anglo American Plc and BHP Billiton Plc.

“We’ve had a strong run, and at these levels you’re seeing importer demand for dollars,” Chris Becker, a Johannesburg- based analyst at Econometrix Treasury Management, which advises companies on currency transactions, said by telephone.

The dollar-rand rate traded near the so-called 100 percent Fibonacci retracement level late yesterday, a point that indicates the South African currency isn’t likely to sustain further gains. Fibonacci analysis uses ratios, which are based on the sequence identified by an Italian mathematician in the 13th century, to predict support and resistance levels for prices. Support is where buy orders may be clustered, while resistance is where there may be sell orders.

Fibonacci Level

“The dollar-rand has run into some support toward the Fibonacci projection target just below 6.7000,” Tradition Analytics researchers led by Quinten Bertenshaw wrote in a note to clients today. “It is not surprising that this support is holding firm ahead of the European Central Bank’s decision which many in the market are treating as a watershed moment in so far as major central bank monetary policy is concerned.”

The ECB will probably raise its benchmark rate for the first time since 2008 on April 7, adding a quarter of a percentage point to 1.25 percent, according to all 57 economists polled by Bloomberg.

Long-term debt gained after the central bank sold 2.1 billion rand ($312.5 million) of 10-year and 25-year bonds at an auction where investors bid for more of the securities than the amount on offer. Shorter-term debt declined.

The 6.25 percent security due 2036 rose 11.9 cents to 73.92 rand, driving the yield down 2 basis points, or 0.02 percentage point, to 8.86 percent. The 13.5 percent bond due 2015 dropped 9.5 cents to 121.32 rand, pushing the yield up 2 basis points to 7.73 percent.

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net.

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