Johannesburg – The rand weakened for the second consecutive day against the US dollar on the European Central Bank’s (ECB) decision to cut rates.
The bank cut rates by 25 basis points to a record low of 0.75%‚ “but refused to do anything else to address the eurozone confidence crisis‚” Holger Schmieding‚ Chief Economist at London-based Berenberg Bank‚ said in a note.
“The ECB neither announced new liquidity initiatives nor dropped any hint that it may intervene again in sovereign bond markets to break the cycle of fear that is engulfing Spain and Italy.”
At 16:39‚ the rand was bid at R8.1427 to the dollar from its previous close of R8.1304.It was bid at R10.0820 to the euro from its previous close of R10.1752 and at R12.6300 against sterling from R12.6713 before.
The euro was bid at $1.2381 from its previous close of $1.2518.
“At the moment there is a healthy demand for dollars and honestly there is still some uncertainty in Europe‚” Ian Cruickshanks head of Nedbank Treasury said.
ECB President Mario Draghi acknowledged that the eurozone's debt crisis had led to a generalized economic slowdown‚ hitting even the strongest countries in the region‚ Dow Jones Newswires reported.
The Bank of England will pump another 50 billion pounds into the UK's ailing economy in its latest attempt to jumpstart growth and counter the effects of the debt crisis in the neighbouring eurozone.