The rand remained slightly softer against the dollar in noon trade on Monday as the euro slipped against the greenback and as investors continued to show concerns about global economic growth.
“The dollar rand really didn't do much over the weekend,” a local currency trader said.
“However, the rand is presently trading stronger than expected considering the broader dollar movements.
“We haven't confirmed a move lower yet and I think that for now a good dollar rand range is 7.65 to 7.75,” the trader added.
“If we go through 7.75, we'll be looking at 7.87,” he said.
At 11:37 local time, the rand was bid at R7.6957 to the dollar from its previous close of R7.6774. It was bid at R10.1606 to the euro from R10.2066 before, and at R12.1663 against sterling from R12.1982 previously.
The euro was bid at US$1.3212 from its previous close of US$1.3279.
Standard Bank said in a note on Monday that in spite of a recovery in risk appetite towards the end of last week, that saw the euro make up some ground against the dollar, the rand had maintained a weakening bias.
“For the past few weeks, the rand had been trapped in a range of R7.50 to R7.70. However, it broke out of this range last week, dropping to a low of R7.75.”
Despite the SA Reserve Bank's MPC meeting and a host of other local data this week, the rand's direction will still be driven by offshore developments.
“Resurgent concerns over China's growth - following last week's disappointing PMI print - has commodity prices and commodity currencies under pressure this morning,” Standard Bank said.
In addition, upcoming eurozone countries' bond auctions this week have raised some concern.
“This toxic mix implies that the rand is likely to maintain its weakening trajectory in the near term.
“Relatively little on the international data calendar will be more than compensated for by a number of speeches this week: the Fed's Bernanke, German Chancellor Merkel and ECB President Draghi take to the podium this week.”
Meanwhile Dow Jones Newswires reported that there had been some positive developments over the weekend, including a press report indicating that Germany would not stand in the way of allowing the European Financial Stability Facility and the European Stability Mechanism bailout funds to be combined to boost the region's firewall, to prevent the crisis in the periphery from spreading.
Data out of Germany also provided a bright spot on Monday as the Ifo index for March came in better than expected at 109.8.
“Today's outcome marks the fifth consecutive increase in the survey indicator that - at the current stage - points to a modest recovery in activity,” economist Annalisa Piazza from Newedge said.
It seemed, however, that investors were not eager to make any bold moves, after disappointing US industrial production numbers and Chinese and eurozone PMI figures last week cast doubt on the strength of manufacturing, raising broader concerns about economic growth. - I-Net Bridge