Rand firm amid stronger euro

 Johannesburg - The rand firmed in midday trade on Thursday tracking the euro which reacted to a successful auction of five-year bonds by Spain, easing concerns about the eurozone's sovereign debt issues.

At 11:43 local time the rand was bid at R7.2484 to the dollar from R7.2815 at the previous close. It was bid at R9.3204 to the euro from R9.3252 before and at R11.1742 against sterling from R11.2459 at its previous close.

The euro was bid at $1.2831 from $1.2821 overnight.

A local dealer said: "Sentiment is towards a stronger rand again which has broken out of the upward progressive channels we saw earlier in the week.

"The euro is well bid, putting pressure on the dollar, so we should see the rand at the low R7.20s against the dollar."

The dealer noted that ECB President Jean-Claude Trichet was expected to pledge continued support for countries in the eurozone wrestling with sovereign debt issues later today, lending to further euro strength.

Nedbank Capital said in a note that the rand is likely to be less affected by domestic economic data than by the performance of the euro, equity markets and commodity prices, which could maintain the currency within a narrow short-term trading range.

"However, prolonged local strikes by the public and private sectors could negatively impact sentiment towards the rand," it said.

Dow Jones Newswires reports that the euro lost earlier gains on Thursday as the recent improvement in global risk sentiment proved short-lived.

However, the single currency did find some support at mid-morning from a successful auction of five-year bonds by Spain, further easing concerns about the eurozone's sovereign debt problems.

A further decline in UK house prices, concern that the European Central Bank will prove more dovish than expected after its policy meeting later on Thursday and speculation about Friday's non-farm payrolls in the US have all helped to inject caution in trading among major currencies.

Global sentiment had initially been buoyed by Wednesday's stronger-than-expected Institute of Supply Management manufacturing survey from the US.

It wasn't long, however, before concerns over the global recovery returned and safe havens returned to favour.

Financial markets also appear to be bracing themselves for a more bearish assessment of the eurozone economy from ECB President Jean-Claude Trichet.    

There is also concern about developments in the US Despite the strong ISM, some analysts are concerned that there could still be downside risks to Friday's employment data for August, especially in the latest jobless claims figures due later on Thursday show another sharp rise.