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The rand is testing a key resistance level after a four-day streak that took it to the strongest level since mid-March.
On Wednesday, the coin broke above 16.35, the Fibonacci retracement of 23.6% from its April high to February 2018 low, after failing to break that level three times in the past three months. A sustained break below could cause the rand to target the 50% retracement at 15.43, followed by the 61.8% level at 14.50.
The rand is the best-performing emerging market currency this month after the Mexican peso and the Brazilian real, driven by higher real returns among developing nations and speculation that the Bank’s record policy easing cycle the South African Reserve could be coming to an end.
As the Federal Reserve is likely to keep interest rates low for the foreseeable future, the South African currency may continue to attract demand from investors who borrow dollars to buy higher-yielding currencies, known as the carry trade. The rand has returned 4% in the carry trade this month.
