Johannesburg – The rand was weaker in midday trade on Monday as the UK Bank Holiday robbed the market of liquidity.
“We are keeping near the R10.50 per euro level so far today‚ but volumes are very light due to the UK holiday‚” a local trader said.
At 12:53 local time on Monday the rand was bid at R8.3802 to the dollar from R8.3520 at Friday’s close. It was bid at R10.5014 to the euro from its previous close of R10.5050 and at R13.2489 against sterling from R13.2133 before.
The euro was bid at $1.2526 from $1.2510 at Friday’s close.
Dow Jones Newswires reported that the euro made some small gains against most major currencies during European trading on Monday as markets waited with baited breath for more monetary easing in the US and the eurozone‚ but overall trading conditions in the currency markets were thinned as London traders were away due to a UK public holiday.
The euro breached $1.2530 against the dollar and ticked higher against the yen‚ Australian dollar and sterling with a lack of liquidity in the markets and an absence of fresh news drivers. Instead‚ market participants are looking ahead to Federal Reserve Chairman Ben Bernanke's policy speech at a symposium in Jackson Hole‚ Wyoming on Friday.
Investors are split over whether Bernanke will deliver what could be his closing argument in deliberations about launching a third round of bond-buying‚ or quantitative easing.
"While the Fed has indicated it is prepared to further ease policy if a 'substantial and sustainable strengthening in the pace of the economic recovery' fails to emerge‚ we think the odds are only 50/50 in terms of a QE3 announcement‚" said Adam Myers‚ senior market strategist at Credit Agricole in London.
"Given elevated market expectations of a Fed move‚ the euro's grind higher against the dollar now looks vulnerable to a correction lower this week‚" he added.
Hopes are also rising that the European Central Bank will employ a bond strategy at its next policy meeting on September 6 to help beleaguered member states. Investors are looking to the ECB to buy up the sovereign debt of troubled member countries such as Spain and to also consider steps to keep government bond yields from rising too high.
These policy hopes overshadowed signs that the eurozone's largest economy continues to weaken. German business confidence fell for the fourth straight month in August as companies saw both their current and future economic conditions deteriorating‚ according to the closely watched Ifo survey.