Graphic: renjith krishnan

The rand was trading stronger against the dollar at noon on the back of a stronger euro and dollar selling from local exporters. Investors were also keenly awaiting US Federal Reserve chairman Ben Bernanke’s speech later today.

“The rand has shown considerable improvement this morning as a result of both a stronger performance from the euro‚ which has recovered from trading around the 1.2500 level at the opening of the local session to its current levels of 1.2550‚ along with considerable dollar selling from local exporters. This has allowed the local currency to move from the high 8.40’s to the current levels around 8.41‚” said William van Rijn‚ senior foreign exchange trader at Nedbank Capital.

At 11.30am‚ the rand was bid at R8.4052 to the dollar from R8.4938 at Thursday’s close. It was bid at R10.5570 to the euro from its previous close of R10.6241 and at R13.2893 against sterling from R13.4043 before.

The euro was bid at US$1.2561 from $1.2508 at Thursday’s close.

The increasing likelihood of a third round of quantitative easing (QE3) in the US has implications for the rand.

“QE2 saw substantial rand and other emerging currencies strength‚ and US policy makers were hinting that QE3 was on the cards as the US unemployment rate was still high‚ only having marginally come off the recession highs‚”

Annabel Bishop‚ economist at Investec Group said in a note.

“Many Americans are still experiencing financial distress in what is an election year‚ and the US economy is experiencing economic growth well below its economic potential. As such‚ QE3‚ and consequent significant rand strength appears likely‚ potentially as early as the next FOMC meeting on September 13. QE2 saw the rand move from R10.20/dollar in 2009 to R6.60/dollar in 2010 as the QE-driven rise in global liquidity sought yield in emerging markets.

“QE2 was announced at a previous Jackson Hole summit‚ but the proximity to US elections this year reduces the likelihood. QE2 was also fuelled by the threat of deflation‚ not something the US is in danger of currently‚” she said. - I-Net Bridge