Shortening the edge against the lira is a popular trade that does not always pay off. But this time is different, indicates a technical signal.
UBS Group AG on Wednesday recommended trading, which Wall Street heavyweights including Bank of America and JPMorgan Chase & Co. have tried in the past without success.
Rand has been the best performance currency in the world this year with a 7% gain against the dollar as risk appetite back to global markets.
Against the Turkish lira, the South African currency has reached 5.1% after last year's 20% increase. But a technical signal suggests that this trend may be changing.
The short-term average of the lira has climbed the long-term average for the first time in more than a year, a so-called golden cross indicating a buy signal to some traders following chart patterns.
"The South African rand and Turkish lira were both recipients of the shift in the Fed's perspective to a more neutral attitude and the favorable mood against risky assets, including those from emerging markets" Tilmann Kolb and Jonas David, London's based strategists in Zurich-based UBS, said in a note to clients. But the currencies may differ in the short term, they said.
"The brink has significantly surpassed, but we see limited space for this trend to expand and expect something reverse, driven by both global and domestic factors," wrote the UBS strategists. "The Turkish Central Bank's hawkish stance and the high interest rate support the lira in the short term."
The rim weakened 0.3% to 2.5784 per. Lira at. 15:26 in Johannesburg.