Johannesburg - The rand firmed in the
morning session on Wednesday eyeing 7.28 against the greenback.
The rand is set to track euro play today, a local trader noted.
At 09:02 the rand was bid at 7.3302 to the dollar from 7.3500 at its
previous close. It was bid at 10.1057 to the euro from its previous close of
10.1129 and was at 11.1829 against the sterling from 11.1827.
The euro was bid at $1.3796 from $1.3766 previously.
A local trader said: "The rand has firmed this morning and a sustained push
through 7.34 could see 7.28 against the dollar. I do think it could be a slog
to break through 7.34 though."
RMB analysts said in their morning report that a gathering of the EU
finance ministers yesterday failed to produce any concrete outcomes. "On the
whole, the ministers appeared rather hesitant, mulling over matters rather than
making firm resolutions.
"A long drawn-out saga will continue to pose downside risk to the EUR and
remains restrictive to further rand gains. For now US dollar/rand continues to
oscillate around 7.36, following the FOMC decision yesterday in which the Fed
kept rates unchanged.
"The local unit should remain constrained in a tight range
given mild international event risk today," said analysts John Cairns and Nema
Ramkhelawan.
RMB also noted that Moody's investor service upheld their stable ratings
outlook for South Africa yesterday. Although an acceleration in economic growth
is key to an upgrade, a reassessment of the current rating also hinges on
increases in foreign liquidity and a sustainable current account deficit, which
we forecast at -5.1% of GDP in 2010 and -6.1% in 2011, it said.
"In terms of the current account, we anticipate a widening toward the
latter part of the year as a stronger rand might constrain exports and
encourage opportunistic buying thereby increasing import growth and leading to
a broadening of the trade deficit. Similarly, we are likely to observe an
increase in income payments as an improvement in corporate profitability will
produce larger dividends payments to foreigners.
"Though adequately funded by
portfolio flows, we remain wary of current account financing given that a
slowdown in global activity could generate capital market outflows and incite
rand volatility," Cairns and Ramkhelawan said.
Dow Jones Newswires reported the dollar fell against the yen in Asia on Wednesday as a widely expected decision by the Bank of Japan to further ease
monetary policy prompted Asian speculators to lock in profits by selling the
greenback.
But the US currency recovered most of its losses as investors shifted their
focus to other dollar-supportive factors such as firm Tokyo shares. However,
dealers said the greenback is likely to keep rising throughout the day.
In its policy board meeting, the BOJ decided that it would offer another
Y10 trillion in three-month cash at a 0.1% fixed rate to financial
institutions, on top of the ¥10 trillion it offered in December.
As the decision had already been factored into trading, "the dollar was
initially driven by 'sell-on-the-fact' forces," said Hiroshi Maeba, a senior
dealer at Nomura Securities. The dollar fell to a low of ¥90.02 from around
¥90.40 before the BOJ announcement.
Dealers said the dollar might continue to rise against the safe-haven yen
if European and US share markets follow Tokyo higher.
Market participants are also focused on upcoming US economic data, dealers
said, including Thursday's US consumer price index for February. Economists
surveyed by Dow Jones Newswires expect the index to rise 0.1% compared with a
0.2% gain in January. Any better than expected figures could push the dollar to
¥91.00 in the coming days, and the euro to ¥125.50, traders said.
Against the dollar, the euro stood at $1.3784 from $1.3776 in New York
overnight.
- I-Net Bridge