Rand at 8.40 against US dollarComment on this story
The rand was tad weaker in afternoon trade on Wednesday‚ following the release of disappointing data‚ as well as the continued eurozone debt debacle.
“There were a number of data that disappointed and that filtered to the markets and also the on-going uncertainties in Europe. There is nothing dramatic to report on‚ the whole world is waiting for the outcome of the Greek election over the weekend‚” a local trader said.
SA’s retail trade data for April came short of expectations. Growth in SA’s retail trade sales at constant (2008) prices for April slowed to a much weaker than expected 1.0% year on year (y/y) after a slightly downwardly revised 6.7% [6.8%] growth in March.
In Europe the eurozone industrial output number for April was reported as the weakest since December 2009. The data was‚ however‚ better than expected with a fall of 2.3% on the year instead of a forecast decline of 2.7%.
Absa Capital in their assessment of the local currency’s recent volatility said: “We are not as constructive about the rand as we were‚ due to heightened levels of global risk aversion‚ a more US$ bullish view and less favourable commodity prices.”
The bank further explained by saying‚ although rand trade was likely to remain volatile in the near term until there was more certainty on the EU debt front.
“We expect the rand to stage a recovery later in the year if global risk appetite improves‚” Absa said.
At 15:56 the rand was bid at R8.4082 to the dollar from Tuesday’s close of R8.3841. It was bid at R10.5204 to the euro from its previous close of R10.4950 and at R13.0545 against sterling from R13.0599 before. The euro was bid at US$1.2521 from Tuesday’s close of $1.2513.
Dow Jones Newswires reported that the euro made small gains against the dollar during European trading on Wednesday as economic data for the eurozone was slightly stronger than expected and the single currency held in a tight range as investors braced for Greece's elections this weekend.
The euro traded above $1.25 against the dollar‚ a new two-day high buoyed by improved market sentiment as Spanish and Italian government bond yields declined a little from the previous day's highs. Markets continued with a positive tone as the eurozone industrial output number for April surprised a little by coming in higher than expected with a fall of 2.3% on the year instead of a forecast decline of 2.7%. Still‚ the output reading was the weakest since December 2009 and indicated that the 17-nation economy may shrink again later this year after it narrowly missed recession in the first quarter.
That mixed set of data provided little impetus to shake the market out of its pre-election funk.
“Markets are naturally quiet ahead of the Greek elections with the outcome so uncertain‚” said Daragh Maher‚ a currency strategists at HSBC Holdings PLC in London.
“There is a reluctance to try and extend any [currency] trend for fear of being caught wrong-footed come Sunday night‚” he added.
Elsewhere‚ the Italian government successfully sold EUR6.5 billion euros ($8.12 billion) of 12-month treasury bills at auction. But the country paid a significantly higher yield compared with last month to lure investors who may have felt uneasy ahead of the Greek elections. The German government sold just over EUR4 billion of 10-year federal bonds at an average yield of 1.52%‚ slightly higher than last month's auction. - I-Net Bridge