South Africa's rand could rise much further
Adds chart
Sept 30 (Reuters) -South Africa's rand could rise much further on the back of the surge in risk appetite and commodity rises stemming from China's huge economic stimulus package.
The rand, which was among the worst of all currency performers last year and was still struggling in April, has surged since, gaining over 12% versus the dollar from 19.38 to 17.04 and over 7 percent versus the yen.
The rand, one of very few free-floating and high yielding currencies, is also a commodity currency that makes it all the more appealing in the wake of China's economic boost.
China is considered to be South Africa's biggest trading partner, and coal and iron ore - which are highly correlated with the Chinese economy - rank highly among main South African export products.
The surge for global stocks that has gained even more impetus from China's stimulus is encouraging traders and investors to take more risk that is fuelling demand for the rand, and this is exerting a vital influence.
Technicals have shifted from undermining to supporting its rise, and after years of decline the rand has lots of scope to strengthen further.
The recent Death Cross sell signal - where 21-WMA fell under 100-WMA - has seen USD/ZAR drop toward the 200-WMA at 16.8911, below which it has rarely traded.
A break would spark more demand for the rand, which has loads of scope to rise in order to recover just a small fraction of its prior drop. The prospect of FX returns significantly adds to the appeal of an already productive carry trade.
Aussie dollar will show how traders really feel about China nL1N3LC07O
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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