Rand firm amid gold surge

Johannesburg - The rand firmed a fraction at midday on Monday, tracking a firmer euro versus a weaker greenback amid a record gold price.

At 11:31 the rand was bid at 7.4995 to the dollar from 7.5799 at its previous close. It was bid at 11.2335 to the euro from its previous close of 11.2498 and was at 12.4522 against sterling from 12.4950.

The euro was bid at $1.4977 from $1.4849 overnight.

Gold rallied to a fresh high of $1,167 an ounce on Monday morning as risk appetite was given a fresh boost amid speculation an economic recovery in Asia was gathering pace.

A local trader said: "A move in commodities helped the rand pullback from its weekend levels of 7.60 against the dollar."

"Gold is higher, as is the euro, so expect a range of 7.45-7.55 against the greenback for the remained of the day."

Earlier RMB analysts John Cairns and Nema Ramkhelawan noted a busy week for local data. "We expect the 3Q09 GDP figure out tomorrow to mark a return to positive growth. We forecast a swing from -3.0% q/q seasonally adjusted and annualised (saa) in Q2 to +2.0% q/q saa in Q3. The stronger growth should largely be driven by the rebound in manufacturing production with mining and financial services detracting," they said.

"The five-yearly rebasing and benchmarking by Stats SA and the Sarb should result in a notable increase in the size of the economy but we do not think the real growth rates will change meaningfully and certainly not enough to have an impact on monetary policy," the analysts said.

"The CPI figure, due Wednesday, should finally see inflation falling back into the target band. Neither GDP nor inflation, however, is likely to affect the rand by more than a few cents," Cairns and Ramkhelawan concluded.

Dow Jones Newswires said that the euro was higher while the dollar and the yen fell back. The single currency was trading at $1.4976 at 11:05, up from $1.4862 in late New York trade on Friday.

Some traders said the dollar may have come under pressure on comments by Federal Reserve Bank of St Louis President James Bullard that he would prefer to keep the central bank's asset-buying programme active beyond its current cut-off date. In an interview with Dow Jones Newswires on Sunday, Bullard said he wants to see the central bank effort to buy mortgage-backed securities maintained beyond the end of the first quarter of 2010.

Barclays Capital analysts said Bullard's comments suggest "that the Fed will continue to underwrite the rally in risk and would leave the USD drowning in liquidity," while minutes of the Fed's policy meeting should also be supportive of further dollar weakness.

- I-Net Bridge