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The Rand fights back

The rand is trading at R15,40 to the dollar, a dramatic recovery after trading at R18 to the dollar last year.

South African rand. Picture: Christa Eybers/EWN.

JOHANNESBURG - With anticipation building ahead of the budget speech next week, the rand has gained some ground against the dollar.

The local currency is trading at R15,40 to the greenback. It's a dramatic recovery after trading near R18 to the dollar last year.

The local currency went into a tailspin in December after President Jacob Zuma announced that he had fired Finance Minister Nhlanhla Nene in favour of unknown David Van Rooyen.

A few days later, Pravin Gordhan was given the task of steering the ship out of troubled waters.

Since then, international factors including news that the US may not hike interest rates have helped emerging market currencies.

But locally, Gordan appears to have gone into top gear to help the economy.

Meetings between government and the country's top executives and a commitment from the president that the economy is the top priority appear to have helped boost much needed confidence.

Hopefully the trend will continue for the rand, with all eyes on the finance minister, who looks set to reveal his economic blueprint next week.

However, the decision by the Reserve Bank to hike the interest rate by 50 basis points - lead to the rand recovering and the latest news from the US has also helped the local currency.

Zuma announced in his State of the Nation address last week that government was concentrating on economic growth.

With the exchange rate recovering, it will now be cheaper to import goods into the country, which is good news for inflation.

GORDHAN TO THANK FOR STRONG RAND

The recent interest rate hike and Gordhan's firmer economic stance have been cited as the main reasons behind the rand strengthening to its best levels so far this year.

Brigid Taylor of KAON Capital said all eyes are now on Gordhan's budget speech next week to see if it can bring even more relief.

"As long as we talk the right language, and that comes down to the budget, then we are still doing a good job and we can recover from this. Hopefully Pravin Gordhan pulls a rabbit out of a hat to keep the ratings agency's at bay."

The local economy has been under strain over the last 12 months, compounded by load shedding last year and massive drought brought on by El Niño.