Rand's rally could be at an end
May 15, 2009
By Ray Faure
Johannesburg - The rand was encouraged by a higher close on Wall Street overnight and held steady in opening trade on Friday having retreated on Thursday amid a decline in global risk appetite which pushed the dollar higher against its rivals.
At 08.45am the rand was bid at R8.5382 to the dollar from an overnight close of R8.5153.
It was bid at R11.5382 to the euro from a previous R11.6143 and at $12.9186 to the pound from R12.9715.
The euro was bid at $1.3594 from $1.3633 overnight.
RMB analyst John Cairns said in his morning report that the upside break on rand on Thursday through R8.56 and R8.61 has encouraged a lot of talk that the currency's rally is over and that the trend will be the other way.
"We're also hearing rumours that a large corporate deal flow (Vodacom) has been completed, not that we put much trust in the rumours of the inflows in the first place. The problem for the rand bears is that moves are still dependent on international markets.
"And while the global equity and risk-taking rally has fizzled, there has been no sharp profit taking, leaving rand versus dollar right back at 8.52 this morning - exactly where we started yesterday," Cairns noted.
Event risk today is unusually focused on the EU where first quarter of 20009 GDP data will be released, he added.
"We know it's going to be bad; consensus is for a 2 percent q/q contraction (8 percent at an annualised pace). US data pours in from 14:30.
"CPI would usually be the main focus and is still very important as the economy toys with deflation (negative inflation) but the main focus today will be on consumer confidence.
"Two-way risks then evident on the day, with a slight downside bias in the morning, but the multi-day bias still appears to be to the topside," Cairns said.
Dow Jones Newswires reported that the yen weakened slightly against the dollar and euro in Asia Friday as higher regional share markets prompted players to trim their holdings of the safe-haven Japanese unit.
Japan's benchmark Nikkei 225 Stock Average was up 1.6 percent in early afternoon trade, as other Asian stock prices also rose.
Players who earlier in the week had expected that lower stock prices would further push up the yen took the stronger share prices as a cue to revise their yen-bullish views, dealers said.
But despite upbeat share markets, dealers said lingering anxiety, particularly over US and European economic indicators later in the day, were likely to limit the greenback's and euro's upside against the yen.
"After the US retail sales, skepticism over how long the recovery in risk appetite would last, so I think it's difficult for players to take on a lot of risk," said Minoru Shioiri, chief manager of foreign exchange trading at Mitsubishi UFJ Securities.
|
|
