Rand firmer

The rand was firmer against the dollar in noon trade as it tracked a euro that had made a modest recovery against the greenback.

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The rand was firmer against the dollar in noon trade on Thursday as it tracked a euro that had made a modest recovery against the greenback as concerns about eurozone sovereign debt eased.

“As far as the rand goes, we've seen a fair degree of selling from local exporters,” a local currency trader said.

“Another factor to note is that the gold price doesn't bode well for the rand - the correlation isn't that strong, but one must keep an eye on gold,” he added.

At 11:52 local time, the rand was bid at R7.6551 to the dollar from its previous close of R7.6885. It was bid at R9.9973 to the euro from R10.0102 before, and at R11.9926 against sterling from R12.0326 previously.

The euro was bid at US$1.3062 from its previous close of US$1.3019.

RMB said in a note that it had been “an extraordinary day” in the markets yesterday.

“From a South African perspective it was the losses on the rand that stand out, with US$/ZAR, EUR/ZAR and GBP/ZAR each spiking around 20 cents.

“The moves have little to do with the talk of SARB intervention. And it certainly has nothing to do with the poor retail sales data - this is a global not a local adjustment,” RMB added.

The global market's moves were initially perplexing.

“They weren't data related and didn't come about because of the usual key determinants of risk appetite (US equities traded marginally up all day) and EUR/US$ (which was flat until late yesterday).”

Rather, RMB said, the moves came about because the market suddenly entertained the possibility that the US economy was in a sustainable recovery. Bernanke's rather subdued comments after the Fed meeting on Tuesday seemed to have been the trigger, however, underlying this was the run of excellent data, particularly on the jobs front.

“The equity market has been trading this more positive view for a while, but it's coming as a shock to currency markets, commodities and bonds.”

“In the currency markets the shock is felt via a stronger US dollar and this is what was behind yesterday's adjustment in the rand - the dollar in fact made ground against most currencies except for the major European crosses.”

RMB said the rand had been hit harder than most other currencies but this was its normal characteristic.

“It's always either the best or worst currency as speculators switch in or out. None of this changes our forecast of trend rand gains. Remember that the rand has historically performed very well when the global economy is strong - ultimately a US revival will prove rand positive.”

RMB said investors might think a US economic recovery would be positive for commodities.

“It's not so clear cut though. Commodities fell yesterday in response to the stronger dollar. The most important consideration is the implication that a recovery could have on global monetary policy: commodities have been one of the main gainers from the massive liquidity injections - particularly gold, which is why it took the biggest hit yesterday.”

Meanwhile Dow Jones Newswires reported that in foreign exchanges, the dollar had trimmed its gains following a stellar rise on a recent string of positive US data that had diminished expectations of a fresh round of easing from the Federal Reserve. - I-Net Bridge

Source: http://www.iol.co.za/rand-firmer-1.1257241

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