Rand still making headway

Johannesburg - The rand continued to surge against major currencies in morning trade on Thursday amid a rise in global risk appetite and ahead of a key local rates decision.

The rate decision has been brought forward to 12:30 from 15:00 because of all the economic data coming out today and owing to tomorrow being a public holiday.

At 12:05 the rand was bid at R8.4305/$ from an overnight close of R8.4806. It was bid at R11.2096/€ from a previous 11.2454 and at 12.5370/£ from 12.5332.

The euro was bid at 1.3294 from US$1.3255 overnight.

"The rand remains on the front foot but it must be getting close to running out of steam," a local currency trader said. "We'll have to see what happens with the rate decision and of course with trade. Trade is about the only thing that spot rand reacts to. The currency ignored producer price inflation data this morning," he added.

SA's foreign trade balance is expected to have reached a R3.5bn deficit in March from the R570.7m deficit set in February. Forecasts varied from a R-1.0bn deficit to a -5.0bn deficit. The data is due at 14:00.

A full house of nine economists see the repo rate dropping by 100 basis points to 8.5%, according to I-Net Bridge's latest Econometer.

The PPI increased 0.1% on a monthly basis after February's monthly decrease of -0.3%.

The PPI was expected to have increased at 5.5% y/y according to a survey of leading economists by I-Net Bridge, with forecasts ranging from just 5.2% to 6.3% y/y. PPI was at 11.9% a year ago.

Dow Jones Newswires reports that rising risk appetite is pushing the dollar and the yen lower and helping the euro and other high-yielders higher in Europe on Thursday.

The improved sentiment was being driven by optimism over the global recovery, especially after Japan reported a surprisingly strong 1.6% rise in industrial production for March. The market had only been looking for a 0.8% increase after February's 9.4% contraction.

The market is also looking for a rise in the Chicago purchasing managers index in the US later in the day. This will lift hope of an upturn in the second quarter and further help to justify the market's subdued reaction to Wednesday's news that the economy had contracted by 6.1% in the first quarter - by even more than had been anticipated.

The rise in risk appetite also suggested that market concerns about swine flu have subsided, even though the World Health Organisation has raised its pandemic alert to level 5 from level 4.

Analysts suggested that the low number of deaths associated with the flu so far has helped to reduce fears of a nasty impact on global growth.

- I-Net Bridge