Rand at 8.19 against the US dollar

Graphic: Renjith Krishnan.

The rand was relatively steady in the afternoon session on Monday‚ with market players not too keen to take strong positions ahead of the meetings of the US Federal Reserve and the European Central Bank (ECB) on Wednesday and Thursday respectively.

“There isn’t much by way of data on the go at the moment; I guess the guys are nervous to make dramatic decisions ahead of the policy rate announcements‚” said Malcolm Charles‚ portfolio manager at Investec Asset Management.

At 15:49 local time the rand was bid at R8.1971 to the dollar from Friday’s close of R8.1815 and Thursday’s close of R8.2389. It was bid at R10.0414 to the euro from its previous close of R10.0726 and at R12.8604 against sterling from R12.8732 before.

The euro was bid at US$1.2255 from Friday’s close of $1.2308.

“The rand remains a key gauge of risk appetite‚” said Mike Keenan‚ sub-Saharan currency strategist at Absa Capital. “The rand could strengthen further from the current levels if we do get signs of monetary accommodation from either the ECB or US Federal Reserve.”

Analysts at RMB said in a note the market was unsure of what to expect but the ECB must deliver something after its president Draghi said last week that the bank would do “whatever it takes”. “The most obvious action is to restart the bond buying programme. Other alternatives are: for a rate cut‚ granting the ESM bailout fund a banking license and easing collateral requirements. If none of this happens‚ Spanish and Italian yields are going to reverse their drop and market tensions will be acute.”

The analysts added that the Fed had less scope to disappoint. “Few expect QE3 quite yet. Bernanke should be dovish though and it’s likely that the Fed will push out its guidance to 2015‚ i.e. signalling rates will remain low until then.” - I-Net Bridge