Rand in consolidation period
July 28, 2009
By Gareth Vorster
Johannesburg - The rand held firm in early trade on Tuesday, in a range of R7.70-R7.80 to the dollar.
At 9.05am the rand was bid at R7.7269 to the dollar from its overnight close of R7.7489. It was bid at R11.0353 to the euro from a previous R11.0424 and at R12.7802 against the pound from R12.7955. The euro was bid at $1.4288 from $1.4242 overnight.
A local trader said: "We are in a range of 7.70-7.80 to the dollar for now, in what is still a consolidation period for the currency."
RMB analyst John Cairns said in his morning report that the dollar/rand has drifted slightly higher on the back of profit taking, providing some much-needed consolidation after the heady run down.
"A push past 7.88/89 would signal a greater correction but with international markets still positive and given the backdrop of the Bharti/MTN deal, it appears the entire market believes dollar/rand will head lower again.
"While one has to be careful about getting into a clearly overcrowded trade, there doesn't seem much risk of going with the flow.
"US consumer confidence data this afternoon remains the key risk," Cairns said.
Dow Jones Newswires reported that upbeat comments on the economy by Australia's central bank governor on Tuesday whetted investors' risk appetite, boosting the Australian dollar, euro and other currencies against the yen.
Reserve Bank of Australia Governor Glenn Stevens said that Australia's economic downturn "may turn out not to be one of the more serious ones of the postwar era, in contrast to the experiences of so many other countries."
He also said in a speech to economists that it's easier to imagine upside risks to the economy balancing out downside risks.
Stevens's hawkish remarks sparked an Australian dollar rise to $0.8292 from an intraday low of $0.8198.
The comments also prompted traders to sell off the yen, often the market's currency of choice when players become risk averse.
Against the US currency the euro rose to $1.4265 after the Stevens remarks, from $1.4233.
The market will be watching US economic data and a US Treasuries auction later in the day, with weak US data or a rise in long-term interest rates on a poor auction likely to weigh on the dollar, traders said.
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