Rand is the biggest beneficiary of the Federal Reserve President Jerome Powell's gift for emerging markets, but a technical indicator suggests that the wave of the South African currency has been exaggerated.
The indicator of the relative strength of the dollar against the dollar, versus the fall, fell below 30 years on Thursday for the first time in a year, a sign for some traders that the green loan fell too far, too fast against its South African counterpart.
The South African currency strengthened 7.4% against the dollar in January, fueled by more annoying federal reserves. This profit is not only the best start to one year after Bloomberg began tracking data in 1998, it also makes Rand the world's highest peak currency this month.
While the overall risky environment has improved, factors that measure market assets in recent months, including the US-China trade war, have not disappeared, said Neman Rakelavan-Bana, an analyst at First Bank in Johannesburg.
"Two-way risks are ample, especially if we throw domestic factors into the mix," she said in the client's note. "Rand also ran very far, very quickly, so that we would not be surprised by the slight reaction."
Rand received 0.3% to 13.3846 for a dollar by 1:40 pm in Johannesburg, after hitting 2% on Wednesday.