After a strong week last week where the Rand registered gains against all major currencies, reaching highs of 7.76 to USD, 12.18 to GBP and 10.21 to EUR, we are seeing some consolidation this week ahead of the next Greek bailout of Euro 130 Bn being approved. The last time the Rand was below 7.70 to the USD was 29 Oct 2011 – 3 months ago!

We've seen some good importer demand and private clients sending funds offshore using their foreign investment allowances.

We have read so much bad news of late, much of which has been priced into the markets, that we shouldn’t be surprised to see some sort of a rally after this period of consolidation should news out of Europe this week be as expected i.e. Greece get their next bailout package, they comply with the conditions and Europe seems to be putting a cohesive plan together to tackle the problem…de ja vu…we’ve read this story somewhere before…and how many times will we read it again.

All of this, coupled with possible further quantitative easing in the US to stimulate growth, could lead to more positive sentiment in the short-term and could result in the carry-trade risk on flows that we saw in 2010, early 2011.

That said, the Rand is still not performing particularly well against its EM counterparts. Take for E.g. the AUD which is trading about 1.06 against USD and only 4 cents off its high of last year i.e. less than 4%. Comparatively the Rand at 7.75 is R1.15 off its best levels of 2011 when it touched 6.60 which is 17% away from these levels. The Rand still has some hurdles to overcome for the international investor especially at home, but for the short-term these may once again be ignored if we see some short-term resurgence in carry trade.

Rand should remain range bound between 7.72 and 7.90 until some further news causes activity on either side of these ranges. Balance of probabilities for now is for further strength all things going as expected…which doesn’t always happen when little countries like Greece need EU 130 Bn to meet their quarterly debt obligations. The difficulty in this game is knowing what’s priced in and what isn’t.