Rand a tad firmer on US GDP

Johannesburg - The rand firmed a fraction in the afternoon session on Friday amid a US GDP figure which came in well above market expectations.

At 15:59 the rand was bid at R7.5497 to the dollar from R7.6006 at its previous close. It was bid at R10.5463 to the euro from its previous close of R10.6042 and was at R12.1221 against the sterling from R12.2515.

The euro was bid at $1.3945 from $1.3962 previously.

A local currency trader said: "The GDP figure in the US surprised the topside at +5.7%, the forecast was for +4.8%." He noted that while the rand did not react initially, with markets already positioned that way, the US GDP figure was good for equities, especially emerging markets.

"If we break 78.52 against the dollar, we could go quite a bit lower," he said.

RMB analysts John Cairns and Nema Ramkhelawan noted marginal US dollar/rand strength following the release of the trade account which recorded a R3.67bn surplus in December 2009 compared to a R2.47bn deficit in November last year, and which greatly surpassed the market's expectation of -R0.3bn deficit.

"The vast improvement in the trade data was mainly attributable to the seasonal decline in imports over the year-end holiday season and might also be an indication of tepid local demand," they said.

"The outcome of today's trade data is reflective of the extreme volatility associated with the series. Despite the positive outcome, we anticipate an overall trade deficit of around R5.3bn for 4Q09 based on the sizeable deficits recorded by Sars in October and November of last year. Based on these estimates, our provisional annual current account forecast for 2009 is -4.5% of GDP worsening to a 5% deficit in 2010," RMB concluded.

Earlier, Dow Jones Newswires reported that speculation that the European Union will eventually come to Greece's aid helped the euro to recover earlier losses in Europe on Friday.

The dollar was mixed as risk appetite improved, helped by confirmation of Ben Bernanke's reappointment as chairperson of the Federal Reserve.

Talk that Greece will eventually be bailed out of its budget deficit problem by other eurozone members started to appear as early as Thursday even though Germany and France both denied that they had any concrete plans for helping the country.

However, speculation took on a new lease of life when European Commission president Jose Manuel Barroso told reporters in Brussels that "it's quite clear that economic policies are not just a matter of national concern but European concern."

- I-Net Bridge