Rand firmer vs dollar on euro

The rand was firmer against the US dollar as it tracked a stronger euro.

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The rand was firmer against the dollar in early morning trade on Wednesday as it tracked a stronger euro.

“It's been relatively quiet during the overnight session and I think today we'll see a dollar/rand range of 7.02 to 7.09,” a local currency trader said.

“There's some data out today and the rand may well react to it.”

The trader added that the local currency would also be influenced by equities as well as bond yields.

“While we've had some enquiries about the ANCYL disciplinary hearing and the resulting disruptions, it's not really a big event for people outside of SA. Equities and broader dollar moves against the euro will be the factors to watch.”

At 08:37 local time, the rand was bid at 7.0502 to the dollar from its previous close of 7.0700. It was bid at 10.1864 to the euro from 10.2029 before, and at 11.4880 against sterling from 11.5191 previously.

The euro was at US$1.4445 from US$1.4432 before.

Standard Bank analysts said in their note on Wednesday morning that rand bulls had ran out of momentum midway through the Tuesday trading session as a result of yesterday's softer than expected local GDP data and disappointing US consumer confidence figures.

“The two dismal outcomes reinforced how vulnerable the rand has been to any evidence of a sluggish growth prognosis - either locally or abroad.

“The uninspiring local GDP data overshadowed the morning's buoyant domestic credit demand data and fuelled hopes that the SARB might reduce its lending rates over the coming months, which encouraged both the JSE and SA bond market bulls and implied a possibility of lower funding costs for short rand positions.”

Standard Bank said the fact that the rand had once again weakened in the face of lower bond yields had served as a reminder of how the rand has decoupled from the local bond market.

However, global risk appetite rebounded swiftly in the wake of last night's dovish FOMC minutes and as a consequence, rand weakness abated overnight.

“The rand could recover even further today if global risk appetite gains further momentum and/or today's local trade data manages to remain in surplus territory. That said, we would not be surprised to see the rand remaining stuck within a 7.03 rand to 7.17 rand range ahead of Friday's much anticipated US employment report.”

Meanwhile Dow Jones Newswires reported that the US dollar fell against the yen and euro on Wednesday in Asia, as investors speculated that growing pessimism toward the US economic outlook would likely keep US Treasury yields low for a prolonged period.

Further weakening in the greenback was “very likely” because US yields had been falling rapidly, suggesting deteriorating consumer and business sentiment regarding the world's largest economy, said Nomura Trust & Banking senior currency dealer Hideki Amikura.

“The dollar will probably fall below Y70 by October,” he said.

Fueling such speculation was Tuesday's dovish remarks by Chicago Federal Reserve President Charles Evans, who insisted more monetary easing was necessary, dealers said.

“It's likely that the FOMC will announce something new at the next meeting, say, an action that will express that the board is committed to keep the long-term yield low,” he said, referring to the Federal Open Market Committee.

Generally, a currency of a nation with falling bond yields weakened because its assets earned less.

To gauge the likelihood of FOMC action at its next two-day meeting beginning on September 20, investors were expected to pay attention to US employment figures scheduled for release this week.

Automatic Data Processing was expected to release US private payrolls data for August at 14:15 SA time on Wednesday.

The median forecast of economists polled by Dow Jones Newswires was for 100,000 more people to be employed compared with a month earlier. But Barclays Capital's chief Japan strategist Masafumi Yamamoto said the result might miss the forecast, prompting market participants to sell the dollar in favour of the safe-haven yen.

If the greenback continued to fall against the yen, the Japanese authorities would likely intervene in the currency market again to buy dollars, dealers said. A key point would be a break below the psychological level of Y75.00.

Still, they were doubtful that any intervention would have a lasting impact to support the greenback.

When the authorities last intervened in August, “Japan spent a massive Y4 trillion in one day, but its effects were limited,” said a senior dealer at a major Japanese bank.

“Intervention cannot beat market sentiment.” - I-Net Bridge

Source: http://www.iol.co.za/rand-firmer-vs-dollar-on-euro-1.1128413

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