Rand beefed up on dollar weakness
June 30, 2009
By Gareth Vorster
Johannesburg - The rand was stronger in morning trade on Tuesday trading off genuine dollar weakness, according to a local currency trader.
At 9am the rand was bid at R7.7498 to the dollar from its Monday night close of R7.8109. It was bid at R10.9560 against the euro from a previous R10.9843 and at R12.9720 to the pound from R12.9210.
The euro was bid at $1.4128 from $1.4072 overnight.
A local trader said: "We are looking at a level of 7.70 today, the last trading day of the month. Yesterday we saw genuine rand strength, but today I think we will trade on genuine dollar weakness."
Said RMB analyst Nema Ramkheawan in a daily report: "dollar/rand continues to prosper around 7.80, acquiring support from its major short-term determinants.
The overnight performance of EUR/dollar, US equities and gold have bolstered the rand opening the door for further gains. We expect the unit to trade within a tight range of 7.75 - 7-90, as investors tread cautiously in anticipation of the US non-farm payrolls data on Thursday.
"We are spoilt for choice on the local data front with M3 money supply, PSCE, trade data as well as consumer confidence figures out today.
"Of particular importance is the contraction in the volume of new vehicle sales as well as the moderation in the Absa house price index, which suggests that the growth in mortgage advances is likely to have remained under pressure during the month.
"While the rand is generally immune to local data, the trade figures might generate a response. Keeping in mind that the trade data is rather unpredictable, we expect the balance to reflect a continued deterioration in export volumes and a slight moderation in imports.
"However, the volatility in the oil price is likely to have exacerbated import prices and hence widen the trade deficit for the month.
"A worse-than-expected outcome could possibly slow the rand's current momentum," Ramkheawan said.
Dow Jones Newswires reported the yen gained moderately against the dollar and euro in Tokyo on Tuesday as Japanese players bought the currency for month-end settlement and the half-year's repatriation of their overseas assets for bookkeeping.
In the early Asian session, the dollar and euro initially rose in response to higher Japanese share prices. But they soon started declining against the yen as short-term players, in order to take profits, joined in Japanese players' selling for book-closing purposes.
Meanwhile, players will also be watching the US non-farm payrolls report for June due on Thursday, dealers said. Economists surveyed by Dow Jones Newswires expect the report to show 350 000 jobs shed in June, compared with a 345 000 contraction in May.
Dealers said any worse than expected result could weigh on share markets, encouraging players to buy the yen, which they consider a safe-haven asset.
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