The rand was range bound in early trade on Monday as lower than expected Chinese consumer inflation failed to move the market.
At 08:50‚ the rand was bid at R8.2582 to the dollar from its previous close of R8.2363 and Thursday’s close of R8.1347. It was bid at R10.1494 to the euro from its previous close of R10.1306 and at R12.7928 against sterling from R12.7729 before.
The euro was bid at US$1.2290 from its previous close of $1.2278.
“We had a quiet start to the week as the Chinese data failed to move the market. That means we will just continue to track the euro‚” a local trader said.
RMB said in its morning comment that Friday’s negative US employment data took the rand to 8.25 per dollar‚ but the negative influence should not linger much longer than today.
“A lot more concerning for us is the flare-up in Spanish yields: global markets have shrugged this off — but for how much longer? Risks then are for further volatility this week‚ with two-way risks even though we have a relatively empty calendar‚” the bank said.
“The bigger story for us is still Europe. Spanish yields dropped from over 7% to almost 6% after the eurozone summit but are now back where they started. What’s remarkable is that the fallout from the renewed worries has been limited. While the euro has collapsed to under 1.23 per dollar‚ the lowest since 2010‚ broader risk appetite has held up.
“The euro’s move against the dollar has been reflected in sharp falls in the euro against the rand‚ in this case to 10.05 last week. Over the past two years‚ we’ve seen a pattern where mild European stress sees euro per rand moving down‚ but heightened stress sees the rand lose ground against everything. The markets are saying we’re in the first category; we’re worried we could be moving into the second.
“Data releases are limited this week‚ with Friday’s Chinese second-quarter GDP (gross domestic product) being the highlight. On the policy front‚ the minutes from the last Fed meeting are released on Wednesday‚ with attention still on whether they’re progressing towards QE3 (a third round of quantitative easing).
“In Europe‚ finance ministers meet for their regular sessions on Monday and Tuesday‚ where they’ll flesh out the plans agreed at the eurozone summit.
“Tomorrow‚ we have the German Constitutional Court ruling on the legality of the ESM (Eujropean Stability Mechanism) bail-out fund‚ something that could postpone but not halt it coming into being‚” the bank said.
Dow Jones Newswires reported that the euro stabilised in Asia on Monday‚ after hitting fresh multiyear lows versus the dollar and sterling‚ supported by profit-taking ahead of the meeting of eurozone finance ministers later in the day.
Expectations were not high‚ though‚ that eurozone finance ministers would make tangible progress in creating a single banking supervisor‚ which eurozone leaders agreed at a summit in June to establish.
China’s consumer inflation slowed sharply to 2.2% year on year‚ the lowest level in nearly two-and-a-half years in June‚ likely one key reason the central bank was comfortable with cutting benchmark interest rates for the second time in less than a month last week. - I-Net Bridge