The rand is stronger in early trade on Wednesday due to the growing optimism that the US Federal Reserve will introduce QE3 on Thursday‚ which has weakened the US dollar and spurred on all risky assets‚ with gains continuing into this morning.
“The huge event today is the German Constitutional Court decision at 10:00 SA time‚ which will pronounce on the legality of the ESM — the EUR500bn second eurozone bailout fund‚” RMB said in a statement.
“It’s expected to uphold the fund‚ but with conditionality‚ a decision that is probably worth a few cents on the rand. An unexpected negative ruling would send global markets plunging‚ with dollar/rand perhaps back in the 8.30s” it said.
At 8.36am‚ the rand was bid at R8.1587 to the dollar from R8.1711 at Tuesday’s close. It was bid at R10.4958 to the euro from its previous close of R10.5111 and at R13.1148 against sterling from R13.1373 before.
The euro was bid at US$1.2871 from $1.2856 at Tuesday’s close.
“Although the rand remains predominantly preoccupied with offshore sentiment‚ yesterday's calls of a nationwide strike in the SA mining sector could hinder rand from a domestic sentiment perspective‚” Absa Capital said in its daily morning report.
“Such a strike would also place even more downward pressure on the country's recovery path and serve to exacerbate the current account deficit situation. In summary‚ we still favour being short dollar ahead of the FOMC‚ but we acknowledge that R8.05/dollar has proven to be a tough nut for rand bulls to crack on four separate occasions over the past three months‚” it said. - I-Net Bridge