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Firm rand unchanged in thin trade

Johannesburg - The rand was little changed in morning trade on Monday from its weekend levels, tracking a modestly firmer euro against the dollar.

A local dealer pointed to a range of R6.87 - R6.92 against the dollar amid quiet trade. "We continue to track the euro."

At 09:02 local time, the rand was bid at R6.8724 versus the dollar from its previous close of R6.8754. It was bid at R9.6345 to the euro from R9.6157 before and at R11.1985 against sterling from R11.1721 at its previous close.

The euro was bid at $1.3976, from $1.3989 at its previous close.

Michael Keenan, Standard Bank's head of forex research, said in a note on Monday that SA's reserves data and/or oil price movements could bring about renewed rand strength.

"Friday's better-than-expected US employment report ensured that rand bulls failed to breach R6.85 to the downside again. This implies that the robust bullish rand momentum of the past few weeks has slowed down in more recent days. The rand has been the best-performing currency over the past month - but it is still the second-worst-performing currency in the year to date, which illustrates just how volatile conditions have been this year," Keenan said.

"Higher oil prices could again translate into broad-based dollar weakness as a result of further fears that the European Central Bank (ECB) would need to hike its lending rates well before the US Federal Reserve due to the inflationary implications of high oil prices," Keenan said.

Meanwhile, Dow Jones Newswires has reported that the weaker dollar was fuelled by rising crude oil prices and continued political unrest in the Middle East.

The weaker greenback was also fuelled by last Friday's US jobs data, which showed sluggish wage growth, they said.

"Rising commodity prices, if wages aren't likely to rise, would worsen a nation's terms of trade and weigh on the economic outlook," said Kenro Kawano, a rates strategist at Credit Suisse.

Dealers said they would pay close attention to a press conference by ECB president Jean-Claude Trichet later in the global day for clues on the central bank's timing of its next rate hike.
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