Rand at 8.37 against the US dollar

Graphic: renjith krishnan

The rand was slightly weaker in early trade on Friday‚ despite news that leading central banks were considering taking action to boost liquidity in global markets if the Greek election outcome resulted in unusually volatile conditions.

The local currency had a softer bias against the US dollar on Thursday‚ with the highly anticipated weekend Greek election capping market activity.

In their morning report‚ Absa Capital said the rand was expected to remain in limbo ahead of the Greek elections.

“We would expect more of the same today for the rand as speculation remains rife over the outcome of this week’s crucial Greek elections; though we point out that this afternoon’s US industrial production and consumer sentiment figures‚ if worse than expected‚ could dampen market sentiment further‚” the analysts noted.

At 08:41 the rand was bid at R8.3729 to the dollar from Thursday’s close of R8.3667. It was bid at R10.5807 to the euro from its previous close of R10.5588 and at R13.0113 against sterling from R13.0021 before.

The euro was bid at US$1.2635 from Thursday’s close of $1.2623.

“Despite the news that central banks will provide liquidity in the euro zone‚ we are going into the weekend with markets concerned about the eurozone crisis. The uncertainty still lingers and markets are seeking direction from the Greek elections‚” a local trader said.

In a further warning of the crippling Greek effect on world markets‚ Barclays Bank said:”A disorderly exit would likely lead to a massive run on bank deposits‚ a meltdown of the Greek banking system‚ and further aggravation of Greece's large economic downturn. For the euro area‚ the main cost would be contagion‚ which is literally incalculable because it depends in large part on 'psychological' responses to the exit. But the risks are potentially enormous.”

Meanwhile‚ Dow Jones Newswires reported that the dollar and euro fell against the yen on Friday in Asia as Japanese exporters settled their accounts‚ while shorter-term investors stayed on the sidelines ahead of elections in Greece and with no surprises from the Bank of Japan.

“Exporters are very lively today and their yen-buying has executed small-sized stop-loss buying orders‚” said Hirotsugu Inoue‚ head of FX sales at UBS in Tokyo.

With no clear signs on which way the election in Greece will go‚ markets are ready for both upside and downside risks‚ traders said.

Still‚ they said that whatever the outcome of the vote‚ markets will likely stay wary on the euro as problems remain in countries such as Spain and Italy.

“The euro may eventually rise back to $1.30 on short-position covering‚ but it won't become an upward trend‚” UBS's Mr. Inoue said. - I-Net Bridge