Rand Fluctuates on Signal Slide to Five-Year Low Was Overdone

The rand swung between gains and losses as technical indicators suggested the currency’s decline to a five-year low had gone too far. South African bond yields climbed.

A slump to the weakest level since the 2008 financial crisis pushed the currency’s stochastic oscillator versus the dollar to 87 today, above the 70 threshold that indicates the rand is oversold. The dollar declined against most of its major counterparts after a core measure of consumer prices suggested the Federal Reserve may keep borrowing costs at record lows.

“The rand is ripe for a pull-back,” John Cairns, a currency strategist at Rand Merchant Bank, said by phone from Johannesburg. “The dollar weakened across the board this afternoon and the rand moved in line with that.”

The rand traded 0.1 percent lower at 10.8914 per dollar by 4:23 p.m. in Johannesburg, paring a retreat of as much as 0.7 percent. It earlier gained 0.3 percent. Yields on benchmark rand bonds due December 2026 rose less than one basis point, or 0.01 percentage point, to 8.35 percent after rising as much as four basis points earlier.

Core inflation, which excludes food and fuel, in the world’s biggest economy rose 0.1 percent in December. The consumer price index rose 0.3 percent, in line with economists’ forecasts.

First-time jobless claims in the U.S. decreased by 2,000 to 326,000 last week, the lowest in more than a month, a separate report showed. The median forecast of economists in a Bloomberg survey was 328,000.

Foreign investors sold a net 394 million rand ($36 million) of South African debt yesterday, bringing outflows this year to 3.06 billion rand, according to JSE Ltd. data.

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