Rand breaks R16/$ barrier

GLOBAL TAILWINDS: BOOSTED BY RECORD GOLD PRICES, DOLLAR WEAKNESS, CURRENCY SURGES >>> Economists warn structural challenges remain despite gain.

- Ina Opperman

The rand strengthened to below R16/$ for the first time in almost four years yesterday, following in the successful footsteps of the gold price that breached $5 000 per fine ounce earlier in the day

In volatile economic times with geopolitics changing from day to day, this is good news for South Africa, although the strong rand is more the consequence of a weaker dollar, while stronger metal prices, including gold, helped.

Sanisha Packirisamy, chief economist at Momentum Investment, said the rand breaching R16 to the dollar reflects a mix of global and local dynamics, including a weaker dollar pressured by de-dollarisation trends (echoed in robust central bank gold buying) and soaring precious metal prices.

Packirisamy said a favourable commodity mix supported the rand as a high-beta emerging market currency. In addition, other factors supporting the rand included:

► Domestic sentiment improving on well-behaved inflation;