Rand still holding strong

Johannesburg - The rand remained on the front foot in midday trade on Friday but US payrolls data later in the day could set the trend for the currency going into the weekend.

At 11:50 local time the rand was bid at R7.1997 to the dollar from R7.2265 at the previous close. It was bid at R9.2634 to the euro from R9.2683 before and at R11.0994 against sterling from R11.1203 at its previous close.

The euro was bid at $1.2838 from $1.2822 overnight.

A local trader said all eyes are on the US data later in the day.

"We have come a very long way this week and we have done relatively well. We are seeing a bit of a base forming at R7.21 going into the payrolls data and after that we will just have to see," he said.

RMB analysts noted in a morning report that this week the rand has seen new highs up at R7.43 and now trying new lows below R7.24.

"Support down at these levels has been rock solid over the past year and once again we should expect a surge of import orders. Risks of a break nevertheless are high. The rand is increasingly sensitive to the international environment and with all the uncertainty over a double-dip the markets are extremely nervous in front of the key US non-farm payroll employment data this afternoon.

"Quite simply, a figure less bad than the consensus 100 000 job losses would see USD/ZAR lower, although it would have to be really good to see us through the various support barriers at R7.17/20/24. Equally though, a disappointing figure and USD/ZAR is going to be much higher. Overall, a very likely volatile afternoon is in store."

Dow Jones Newswires reports that the dollar is mixed and the euro has edged higher in places as investors position themselves ahead of the latest US payrolls data.

The pound is also lower as new data boosted fears that the UK economy is slipping back into recession.

General risk sentiment is slightly positive going into the US numbers with small gains in Asian stock markets followed by rises of as much as 0.3% on European bourses.

Market reaction to the payrolls is highly unpredictable, not only because of the shifting risk sentiment in the investor community, but also because of the US holiday on Monday, which will probably reduce liquidity in many financial markets.

The Dow Jones Newswires consensus forecast is for a 110 000 decline in payrolls last month, a little less that the 131 000 fall registered in July. But risks are seen largely to the downside given disappointment over the ADP private-sector employment report earlier in the week.

Although a poor payrolls number will boost expectations of further quantitative easing in the US and should undermine the US currency, the dollar could actually benefit if the data lowers risk appetite once again and leaves investors moving back into safe havens, such as the dollar.