Rand stronger on weaker buck

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Graphic: renjith krishnan

The rand was trading stronger in late trade on Wednesday due to a weaker dollar‚ with all markets in a wait-and-see mode ahead of Wednesday’s German court decision on the eurozone and Thursday’s Fed announcement.

At 3.34pm‚ the rand was bid at R8.1770 to the dollar from R8.1867 at Monday’s close. It was bid at R10.4835 to the euro from its previous close of R10.4424 and at R13.1026 against sterling from R13.0807 before.

The euro was bid at US$1.2821 from $1.2761 at Monday’s close.

The German Constitutional Court will decide on the legality of the European Stability Mechanism (ESM) eurozone bailout fund on Wednesday and the US Federal Reserve (Fed) has its policy meeting on Thursday.

Expectations are that the German court will back the eurozone bailout fund which would allow Germany to contribute to the eurozone's rescue fund‚ while speculation has it that the Fed will ease monetary policy further with a third round of quantitative easing (QE3) a possibility‚ which would be good for riskier currencies and markets and would boost the euro.

“The rand has strengthened against the dollar‚ with it being a dollar move rather than a rand move. The German Constitutional Court decision tomorrow is perceived to be a rubber stamp‚ but if they change their minds‚ it would be negative for the rand‚” said Ian Martin‚ currency trader at Rand Merchant Bank.

“The current account figure this morning was disappointing and not expected‚ which put pressure on the rand earlier. If QE3 is announced on Thursday‚ which I do not think will happen‚ the dollar will weaken‚ which would strengthen commodity currencies such as the rand‚” he added.

The local current account deficit print released on Tuesday morning was reported at 6.4% (-R200bn) compared to a consensus of 4.7% (-R146.9bn) of gross domestic product. - I-Net Bridge


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