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Johannesburg – The rand was steady in early trade on Friday‚ despite the depressed global sentiment following comments by US Federal Reserve chairperson Ben Bernanke that fell short of expectations of imminent stimulus measures.
“The markets are cautious at the moment‚ global policy makers are not optimistic of economic growth…. The markets will remain tentative as we head into the weekend‚” said a local trader.
At 08:13 the rand was bid at R8.4102 to the dollar from Thursday’s close of R8.3966.
It was bid at R10.5102 to the euro from its previous close of R10.5495 on Thursday and at R13.0060 against sterling from R13.0361 at its previous close.
The euro was bid at US$1.2502 from Thursday’s close of $1.2567.
In its morning report‚ Standard Bank said the announcement that China’s central bank had decided to cut its benchmark interest rate by 25 basis points yesterday - the first cut since 2008 - initially buoyed sentiment.
“The euphoria proved short-lived‚ however‚ on concerns that the cut was a preemptive move ahead of expected investment and output growth figures tomorrow‚” Standard Bank said.
“The rally was further dampened by comments by Fed chairman Bernanke that the Fed would need to assess conditions before deciding whether to provide further monetary stimulus.
"These comments were widely interpreted as pouring cold water on the idea of (a third round of quantitative easing) after several Fed officials had hinted at the possibility over the last few days‚” the bank said.
Standard Bank added that with sentiment down again‚ the rand had resumed a weakening trend this morning‚ having strengthened to below R8.30 yesterday.
“With little on today’s data slate‚ markets are likely to edge sideways into the weekend‚ with shifting expectations over the likelihood of further central bank action likely to be the main driving force‚” it said.
Dow Jones Newswires reported that the euro was lower against the dollar and yen during Asian trading on Friday as risk sentiment took a hit from the comments by Bernanke‚ who on Thursday stopped short of signalling that the Fed would take imminent action to support the US economy.
Equity markets in Asia also slid lower despite the People’s Bank of China unexpectedly cutting its key lending and deposit rates on Thursday‚ a move that had raised expectations Bernanke would signal more accommodative policies in the US.
Although Bernanke said the Fed was prepared to take action to boost the US economy if needed‚ he stopped short of signalling further easing at the June 19-20 Federal Open Market Committee‚ saying Fed officials “are still working” on assessing the outlook and deciding whether to act.
“There were some hopes of policy action being taken‚ but nothing specific came out‚ disappointing some market participants‚” said Minori Uchida‚ chief analyst at the Bank of Tokyo-Mitsubishi UFJ.
“Risk aversion is gradually taking hold as equities slide somewhat lower‚” he said.
At 04:50 GMT‚ the euro was at $1.2523 from $1.2562 late New York trading on Thursday‚ according to trading platform EBS. The common currency was at ¥99.30 from ¥99.99 and the dollar was at ¥79.30 from ¥79.64.
The euro’s retreat mirrored a fall in regional equity markets‚ with the Kospi down 0.5% and the Nikkei down more than 2%.
Masashi Murata‚ senior currency strategist at Brown Brothers Harriman in Tokyo‚ said that yen-crosses were being bought as the market’s previous optimism stoked by China’s rate cuts and expectations for Fed action receded‚ while the euro was also facing some downward pressure.
“The yen was bought back as we entered Tokyo trading hours‚” he said.
But without any major economic indicators or events before the weekend‚ he said the “currency market lacked direction for the time being”.
Murata also said China’s rate cuts may have been aimed at pre-empting some weekend data that could come out worse than expected. China’s consumer price index‚ industrial production and trade data are slated for release on Saturday and Sunday.
Elsewhere‚ Japan raised its first-quarter gross domestic product growth estimate to an annualised 4.7% from the previous quarter from an initial reading of 4.1%‚ largely because capital spending was revised upward.
But separate data released on Friday showed that the country’s current account surplus in April narrowed by 21.2% from a year earlier to ¥333.8bn‚ below forecasts and down for the 14th straight month in a worrisome sign for the still-fragile‚ export-led economy.
Japan’s weaker-than-expected current account surplus suggested a cap on the yen’s strength in the midterm‚ said Daisuke Karakama‚ market economist at Mizuho Corporate Bank.
“The markets are cautious at the moment‚ global policy makers are not optimistic of economic growth…. The markets will remain tentative as we head into the weekend‚” said a local trader.
At 08:13 the rand was bid at R8.4102 to the dollar from Thursday’s close of R8.3966.
It was bid at R10.5102 to the euro from its previous close of R10.5495 on Thursday and at R13.0060 against sterling from R13.0361 at its previous close.
The euro was bid at US$1.2502 from Thursday’s close of $1.2567.
In its morning report‚ Standard Bank said the announcement that China’s central bank had decided to cut its benchmark interest rate by 25 basis points yesterday - the first cut since 2008 - initially buoyed sentiment.
“The euphoria proved short-lived‚ however‚ on concerns that the cut was a preemptive move ahead of expected investment and output growth figures tomorrow‚” Standard Bank said.
“The rally was further dampened by comments by Fed chairman Bernanke that the Fed would need to assess conditions before deciding whether to provide further monetary stimulus.
"These comments were widely interpreted as pouring cold water on the idea of (a third round of quantitative easing) after several Fed officials had hinted at the possibility over the last few days‚” the bank said.
Standard Bank added that with sentiment down again‚ the rand had resumed a weakening trend this morning‚ having strengthened to below R8.30 yesterday.
“With little on today’s data slate‚ markets are likely to edge sideways into the weekend‚ with shifting expectations over the likelihood of further central bank action likely to be the main driving force‚” it said.
Dow Jones Newswires reported that the euro was lower against the dollar and yen during Asian trading on Friday as risk sentiment took a hit from the comments by Bernanke‚ who on Thursday stopped short of signalling that the Fed would take imminent action to support the US economy.
Equity markets in Asia also slid lower despite the People’s Bank of China unexpectedly cutting its key lending and deposit rates on Thursday‚ a move that had raised expectations Bernanke would signal more accommodative policies in the US.
Although Bernanke said the Fed was prepared to take action to boost the US economy if needed‚ he stopped short of signalling further easing at the June 19-20 Federal Open Market Committee‚ saying Fed officials “are still working” on assessing the outlook and deciding whether to act.
“There were some hopes of policy action being taken‚ but nothing specific came out‚ disappointing some market participants‚” said Minori Uchida‚ chief analyst at the Bank of Tokyo-Mitsubishi UFJ.
“Risk aversion is gradually taking hold as equities slide somewhat lower‚” he said.
At 04:50 GMT‚ the euro was at $1.2523 from $1.2562 late New York trading on Thursday‚ according to trading platform EBS. The common currency was at ¥99.30 from ¥99.99 and the dollar was at ¥79.30 from ¥79.64.
The euro’s retreat mirrored a fall in regional equity markets‚ with the Kospi down 0.5% and the Nikkei down more than 2%.
Masashi Murata‚ senior currency strategist at Brown Brothers Harriman in Tokyo‚ said that yen-crosses were being bought as the market’s previous optimism stoked by China’s rate cuts and expectations for Fed action receded‚ while the euro was also facing some downward pressure.
“The yen was bought back as we entered Tokyo trading hours‚” he said.
But without any major economic indicators or events before the weekend‚ he said the “currency market lacked direction for the time being”.
Murata also said China’s rate cuts may have been aimed at pre-empting some weekend data that could come out worse than expected. China’s consumer price index‚ industrial production and trade data are slated for release on Saturday and Sunday.
Elsewhere‚ Japan raised its first-quarter gross domestic product growth estimate to an annualised 4.7% from the previous quarter from an initial reading of 4.1%‚ largely because capital spending was revised upward.
But separate data released on Friday showed that the country’s current account surplus in April narrowed by 21.2% from a year earlier to ¥333.8bn‚ below forecasts and down for the 14th straight month in a worrisome sign for the still-fragile‚ export-led economy.
Japan’s weaker-than-expected current account surplus suggested a cap on the yen’s strength in the midterm‚ said Daisuke Karakama‚ market economist at Mizuho Corporate Bank.
