South Africa's Rand Rallies to End Seven-Day Losing Streak

  • Technical indicators suggest to some traders fall overdone
  • Trims loss this year to 7 percent, most among 31 currencies

South Africa’s rand rebounded from seven days of declines, rising the most among major and emerging-market currencies, as technical indicators suggested to some traders the currency’s fall to a record this week was overdone.

The currency of Africa’s most developed economy gained 0.8 percent to 16.6407 per dollar by 12:38 p.m. in Johannesburg on Tuesday, reversing an earlier decline of as much as 1 percent. That trimmed losses this year to 7 percent, the biggest retreat among the 31 emerging-market and major currencies tracked by Bloomberg.

“Liquidity conditions are quite thin,” Ricardo da Camara, a market analyst at ETM Analytics (Pty) Ltd., said by phone from Johannesburg. “Looking at technical indicators it has been pushed quite far, but it’s not to say it can’t do that again.”

The rand’s relative strength index was above the 70 level for a fifth day on Tuesday, suggesting to some traders the currency is oversold and poised for a rebound. The rand plummeted as much as 9 percent on Monday, the most in more than seven years, in Asian trading amid reduced demand for emerging-market assets. Such flash crashes will probably become more common in foreign-exchange trading as liquidity shrinks amid tighter regulation and reduced demand for emerging-market assets, according to Insight Investment Management Ltd. and Citigroup Inc.

The currency’s gains on Tuesday could be attributed to “profit taking in a very thin market,” Jim Bryson, a currency trader at Rand Merchant Bank in Johannesburg, said by phone. “It will remain thin until a bit more certainty returns to the market.”

Volatility in the rand versus the dollar surged toward the highest level in four years, while a measure of global currency price swings climbed to the most since October. The difference between prices at which traders are willing to buy and sell the rand, used as a gauge of liquidity, was about 1.5 times wider on average in the past six months than it was during the first half of 2015, according to data compiled by Bloomberg.

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