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Rand gains as Greenspan's remarks fail to boost dollar
February 18, 2005
Johannesburg - The rand gained more than 5c against the dollar yesterday after US Federal Reserve chairman Alan Greenspan's remarks to the senate failed to lift the greenback.
At 5pm the rand was bid at R5.9351 a dollar, compared with R5.9903 on Wednesday.
Greenspan provided no surprises in his testimony as he reiterated that the US economy was expanding at a healthy pace and that the federal funds rate remained low in real terms despite recent rises.
Worries about the massive US trade and budget deficits have weighed on the greenback since last year, causing the currency to drop. But the dollar has since recouped some of those losses as market attention has shifted to other factors.
Some of the fears about a plunging dollar have subsided after the market saw recent comments from US President George W Bush as an indication that the administration was getting serious about reining in spending and tackling the twin deficits in trade and budget spending.
At 5pm in Johannesburg the euro was bid little changed on the day at $1.3049 after jumping to $1.3070 earlier in the session.
The euro was buoyed earlier in the day after Greenspan failed to address concerns about the US's current account deficit, which hit a record high last year.
His remarks to the senate on Wednesday, which were expected to give a clearer view on the US rate outlook, disappointed investors by giving no timeframe for rate increases or any clues on the pace of monetary tightening.
Greenback was due to continue his two-day testimony later yesterday, but analysts did not anticipate any major news.
The high interest rate differential between South Africa and the US has contributed to a three-year rally in the rand, which fell to a 14-week low against the dollar when the US rates were raised by 0.25 percentage points this month.
Government bond yields remained steady ahead of the annual budget speech by finance minister Trevor Manuel and inflation data due next week.
Manuel is expected to raise growth forecasts for the economy, and possibly also cut estimates for the budget deficit, which was forecast to swell beyond the key mark of 3 percent of gross domestic product this year.
The yield on the R153 bond weakened 6 basis points to 7.61 percent. The yield on the R194 bond was softer by 2 basis points at 7.41 percent.
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