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Rand continues narrow range trade
December 14, 2009
A firmer South African rand remained in a tight range in the afternoon session on Monday with liquidity poor and volume thin amid very little economic data.
At 15.40pm the rand was bid at R7.4604/$ from R7.5165$ at its previous close.
The euro was bid at $1.4622 from $1.4615 overnight.
A local currency trader said: "It's been very quiet, we saw some demand from local corporates earlier on, but liquidity has been poor, and volume quite thin."
"Gold has come off its highs and we continue to track overseas currencies."
Earlier, Dow Jones Newswires said Abu Dhabi's $10 billion surprise financing to help Dubai cover its debts has lifted global sentiment and left the dollar on the back foot in Europe Monday.
Optimism over the global economy was also encouraged by news that Citigroup Inc. is about to repay its credit-crunch bailout from the US government.
The main beneficiary of the improved mood was the euro, but investors appeared wary of pushing the single currency too far while they wait for Greece to unveil its plans for reducing its budget deficit.
Without a convincing timetable, international support for Greek bonds will continue to fall and the country runs the risk of defaulting on its sovereign debt.
The announcement that Abu Dhabi will provide funds to help Dubai World service a $3.5 billion bond payment due Monday immediately reversed sentiment in a market that was becoming increasingly concerned about a default.
Underlying hope for the global recovery has been helped, meanwhile, by news from the US on Friday that both retail sales and consumer confidence were stronger than expected last month.
However, reaction to the survey was muted as the data also showed that capital expenditure plans are being cut sharply, a signal that business confidence in the future is poor.
Some analysts reckon that the Abu Dhabi move will be instrumental in helping risk appetite to recover.
"Markets are likely to reverse the risky asset decline seen November 25 when Dubai announced that it would not stand by its debt obligations," said currency strategists at BNP Paribas SA.
For the euro, however, gains are being limited as investors wait for Greek Prime Minister George Papandreou to unveil details of plans to reduce the country's budget deficit over the next four years to 3 percent of gross domestic product from about 12.7 percent now. - I-Net Bridge
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