The rand was a touch firmer in early morning trade on Tuesday.
“We are just tracking the euro at the moment‚ so wherever they zig we zag‚” a local trader said.
At 08:21 the rand was bid at R8.4437 to the dollar from its previous close of R8.4516. It was bid at R10.2315 to the euro from its previous close of R10.2429 and at R13.1022 against sterling from R13.1092 before.
The euro was bid at US$1.2112 from its previous close of $1.2120.
Absa Capital said in its morning commentary that the rand continued to weaken sharply on Monday‚ falling to 8.48 to the dollar‚ its weakest level since late June in relation to the dollar. “The rand’s sell-off was again a function of increased concerns about the eurozone debt crisis‚” the bank said.
“Recently‚ these concerns have focused on Spain‚ but today the spotlight could return to Greece‚ given that the ‘troika‘ (the European Union commission‚ the European Central Bank and the International Monetary Fund) are meeting Greek officials to determine whether the country is still on track to meet the conditions that were agreed when Greece received financial assistance earlier in the year.
“A fresh wave of concerns about Greece could bring about increased risk aversion and‚ in turn‚ cause the rand to weaken further.
“This morning’s Chinese PMI (purchasing managers’ index) data showed an improvement on the month‚ but the fact that the reading was still below the critical 50 mark (implying that the country’s manufacturing sector is still contracting) could curb any substantial relief rally of risky assets.
“This morning’s European Union composite PMI reading will give further insight into the state of the global manufacturing sector. If these data disappoint‚ risk aversion could accelerate‚ which in turn‚ would also be conducive to a weaker rand environment‚ as would deterioration in today’s South African Reserve Bank leading indicator. Although there are a number of potential catalysts for extended rand depreciation‚ we note that the rand has already weakened significantly over the past two days‚ so we would not be surprised if the rand bears take a breather today‚” the bank concluded. - I-Net Bridge