The rand was range bound in quiet noon trade on Wednesday waiting for the outcome of the US Federal Open Market Committee (FOMC) meeting later in the day amid growing hopes that some kind of stimulus would be announced.
Market participants are expecting further monetary easing either via the extension of Operation Twist or further quantitative easing as an option.
“All eyes are on the FOMC and the rand is trading in the 8.17 to 8.25 range today‚” a local trader said.
At 11:52 the rand was bid at R8.2205 to the dollar from R8.2752 at noon on Tuesday and Tuesday’s close of R8.1944. It was bid at R10.4414 to the euro from its previous close of R10.3940 and at R12.9191 against sterling from R12.8817 before. The euro was bid at US$1.2700 from Tuesday’s close of $1.2686.
Dow Jones Newswires reported that in foreign exchange markets‚ sterling rebounded against the dollar on Wednesday as a bias towards selling the dollar ahead of a Federal Reserve monetary policy decision later in the day and talk of merger-related sterling buying offset a dovish set of minutes from the Bank of England’s Monetary Policy Committee.
The pound had dropped sharply against both the dollar and the euro on Wednesday after minutes from the Bank of England’s June MPC meeting showed a narrow vote in favour of keeping its asset purchase programme unchanged‚ raising the probability of additional easing in July.
Yet sterling snapped back against the dollar to above $1.57‚ having traded at the day’s low of $1.5654. It also regained some lost ground against the euro‚ which fell back from the day’s highs.
One London-based trader linked the rebound to merger-related buying which he believed may be linked with US Walgreen’s agreed part-purchase of UK chemist Alliance Boots.
Strategists also said that currency traders hoping for further monetary policy easing by the Federal Reserve later on Wednesday have also had a big impact.
“With people thinking we might see some more quantitative easing from the Fed tonight‚ they have taken advantage of the fall in the pound to jump in‚” said Sara Yates‚ currency strategist at Barclays in London. She added that there was a lot of retail demand to buy the pound around the day’s lows. - I-Net Bridge