Johannesburg – The rand was range bound in late trade on Thursday as European leaders kicked off a two-day European Union 19 summit to discuss the future of the eurozone.
“The rand is being dominated by Europe‚ with volatility caused by uncertainty over what would happen if Germany refused to help the eurozone out of its woes‚” a local trader said.
At 15:58 the rand was bid at R8.4159 to the dollar from its previous close of R8.4278. It was bid at R10.4703 to the euro from its previous close of R10.5137 and at R13.0640 against sterling from R13.1253 before. The euro was bid at $1.2439 from its previous close of $1.2473.
Barclays said in a note today that many market participants were not very optimistic that the summit would result in a definitive and coordinated approach for tackling Europe’s intensifying debt crisis.
“In that case‚ risky assets are likely to remain on the back foot‚ but not come under severe selling pressure. However‚ if some encouraging and concrete measures are announced‚ we would expect to see risky assets‚ including the rand‚ rally into the weekend‚” the bank said.
Meanwhile the euro hit a fresh three-week low against the dollar and Japanese yen on Thursday after a brief‚ sharp selloff in early European trading as investors pared back their expectations for meaningful progress at the EU summit in Brussels‚ Dow Jones Newswires reported.
“Growing signs of tension between Germany and its more indebted partners‚ notably Italy and Spain‚ over the best way to bring down onerous borrowing costs has left currency traders increasingly pessimistic that a definitive resolution to the eurozone debt crisis will be found.”
“The proverbial flicker of hope that typically precedes an EU Summit has all but died‚" strategists at BNY Mellon wrote in a research note.
Emerging market currencies also declined‚ with traders keeping a close eye on the Turkish lira amid growing tensions between Turkey and Syria.
The Swedish krona briefly strengthened after Swedish retail sales for May came in up 4.6% on the year against the 4.1% forecast.