Markets Correspondent

EXPORTERS said they were not yet feeling the pinch from the rand's rise to a four-month high this week, with expectations of an interest rate cut likely to ease concerns in the struggling sector.

The rand maintained its strength for the second day in a row yesterday, trading at R5,96 against the dollar for most of the day, before moving back up to the R6 level.

Exporters said yesterday that although they were not feeling the effect of a stronger currency yet, a rand trading between R6,50 and R7 against the dollar would help them to be more competitive.

A cut in interest rates at the Reserve Bank's monetary policy committee meeting next month would help ease the burden on exporters, but companies should not rely on a weaker currency to boost profits, analysts said yesterday.

The latest Reserve Bank quarterly bulletin shows a deficit of R5,5bn in the trade account in the second quarter the first time in 22 years that imports have totalled more than exports.

A strong rand does not bode well for exporters' bottom line, since they make their revenue in dollars, but cover their costs in rand.

"One has to start expecting this (strong rand) could be a long-term phenomenon driven by external factors beyond our control," Absa treasury economist Chris Hart said.

Econometrix Treasury Management analyst Michael Keenan said exporters could not rely "on a currency to keep your shop open".

"Adjusting to a strong rand will make local firms more efficient, and more sustainably competitive globally," Keenan said.

Gold mining company Harmony said yesterday that the higher dollar price of gold, which has been trading at a 16-year high of about 440/oz, had helped to partially offset the gains in the rand.

"Fortunately, the higher dollar price of gold has to an extent negated the impact of a stronger rand. We are now receiving a higher price in rand per kilogram than we were in the last quarter," Harmony marketing director Ferdi Dippenaar said. He said a rand at about R6,50 against the dollar would be "a lot easier" on exporters.

Keenan said the strong gold price would also help limit job losses in the mining sector.

Manufacturers may struggle, though, and the only way for them to respond would be to reduce costs.

"A cut in interest rates would help to take out some of the sting," Hart said.

Capital equipment manufacturer Bell said a rand of between R7,50 and R8 against the dollar would be more competitive. Doug Rhind, Bell's financial director, said the strong rand would hurt its exports, and increase competition from European imports.