The rand was on the front foot in early morning trade on Wednesday, boosted by strong risk appetite ahead of the announcement of European Central Bank's (ECB) second long-term refinancing operation (LTRO) later in the day.
At 09:17 local time, the rand was bid at R7.4738 to the dollar from its previous close of R7.4813, off the intraday high of 7.4270. It was bid at R10.0596 to the euro from R10.0798 before, and at R11.8905 against sterling from R11.9034 previously.
The euro was bid at US$1.3464 from its previous close of US$1.3477.
Tony van Dyk, currency dealer at Iquad Group, said: “The rand has broken through the 7.50 technical to the US dollar on risk trade. The expected ECB announcement to pump liquidity into the European banks will further boost the local unit.”
Standard Bank said in a note that market sentiment was still upbeat ahead of the LTRO.
If a similar amount to December's EUR500 billion is seen today, risk appetite could receive a further boost, with the rand standing to benefit along with the euro and other commodity currencies.
“While the slew of local data out today could ordinarily be expected to have an impact on the currency, today's focus is likely to remain firmly on Europe. Only a much bigger trade deficit than anticipated could potentially sway the currency but, given the volatility in the trade numbers and with the rand still at the mercy of global currents, we judge this risk to be small,” Standard Bank said.
Dow Jones Newswires reports that the euro probably won't look quite so attractive once the fog over the LTRO lifts.
Even if the ECB's second long-term refinancing operation is deemed a success, concern over how the proceeds of the operation are being employed, worries about the eurozone's growth prospects, and recent developments in Spain and Ireland, could well knock the single currency off its perch.
For weeks the euro has been buoyed by the increase in market liquidity provided by the first LTRO exercise back in December and by the fact that peripheral debtor yields have been on the slide. - I-Net Bridge