Relieved investors help lift rand
April 6, 2009
By Jacqueline Mackenzie
Johannesburg - The rand remained firm on Monday and could break R9.00 to the US dollar.
At 8.55am the rand was bid at R9.0116 to the dollar from an overnight close of R9.0310. It was bid at R12.2080 against the euro from a previous R12.2020 and at R13.4548 to the pound from R13.4085 before. The euro was bid at $1.3529 from $1.3514 overnight.
RMB analysts said in their morning report that local political risk is set to diminish on Monday as, by all newspaper accounts, the NPA looks likely to drop charges against ANC leader Jacob Zuma.
"This should be a mild rand positive but really all eyes still remain on international markets," RMB said.
By the end of last week US equities had completed a month-long 25 percent rally, the strongest move in 70 years.
Risk-taking then is back in full force. Gains have also continued into today, global markets shrugging off last week's rather un-encouraging US employment data.
Asian equity markets are up almost 2 percent, the yen is weakening with reports suggesting carry trades are back on and dollar versus euro has pushed up towards $1.3600, RMB noted.
RMB expects the rand to trade in an R8.85 to R9.25 range for the day.
Dow Jones Newswires reported the euro is gaining against the dollar and yen on Monday as investors worry less about the global economy.
Bank of Tokyo-Mitsubishi UFJ chief analyst Osamu Takashima expects the dollar to keep rising against the Japanese yen, to ¥102 if risk appetite is maintained.
He said US shares' strength, despite the poor jobs data, "means that markets have fully factored in" the poor state of the US economy.
Currency traders are taking on more risk given recent economic data that indicates signs of stabilisation, global policy initiatives and the Group of 20 stimulus package announced this week, as well as the rebound in commodities and equities markets.
As a result, emerging market and commodity currencies, such as the Mexican peso and Australian dollar, are rallying. Flow data from The Bank of New York Mellon also confirms increased interest in the Korean won, Indian rupee, Taiwan dollar, Singapore dollar and Indonesian rupiah.
"The reflationary trade is in," said Dustin Reid, director of foreign exchange strategy at RBS in Chicago. "Everyone is seeking yield".
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