The rand continued to trade in ranges‚ with a firmer bias‚ in midday trade‚ with analysts saying markets were awaiting the interest rate announcement by the Reserve Bank’s monetary policy committee in the afternoon.
At 11:49 the rand was bid at R8.1542 to the dollar from its previous close of R8.1547. It was bid at R10.0111 to the euro from its previous close of R10.0085 and at R12.7662 against sterling from R12.7521 before.
The euro was bid at US$1.2277 from its previous close of $1.2281.
RMB said in its morning report that it was time for the rand to rally. “EUR/USD seems to have finally stabilised‚ US equities are pushing multimonth highs‚ funding stress is easing‚ the surge of foreign bond buying continues‚ and our compatriot currencies are flying‚” RMB said.
The bank said the major international event of the day was the Bundestag’s vote on the Spanish bank bail-out. The deal is expected to pass easily but there is the potential for a revolt by some backbenchers‚ causing embarrassment to Chancellor Angela Merkel.
On the local front‚ all eyes will be on the MPC press conference‚ but with a rate cut later this year already priced in‚ RMB said it was hard to see how anything said today could affect the rand negatively.
Bruce Donald‚ head of rand strategy at Standard Bank‚ said: “We expect that the SARB will stay on hold following its July MPC meeting‚ which concludes today‚ but believe that the probabilities surrounding a cut in September or November are close to 50-50. Inflation is now comfortably inside the SARB’s target range.
“Today’s decision and accompanying rhetoric should give us a clearer idea as to how weak the growth story might need to be to prompt a cut. We expect that the Bank could revise both its inflation and growth forecasts downwards at this meeting.”
Meanwhile‚ Dow Jones Newswires reported that some banks in the UK expected signs of corporate distress to increase in the second half of the year‚ the Bank of England (BoE) said on Thursday‚ as the economy struggles to climb out of recession.
In a quarterly report on trends in lending in the UK‚ the BoE said some lenders expected corporate liquidations and write-offs of bad loans to increase in the final six months of the year after witnessing fewer signs of distress than expected in the first half. - I-Net Bridge