Johannesburg – The rand was stronger at noon on Thursday‚ on the back of a stronger euro due to positive sentiment out of the eurozone‚ which filters through to riskier currencies such as the rand.
Market participants were eagerly awaiting the European Central Bank’s president Mario Draghi’s rate announcement and press conference later today‚ with more information on the bond-buying plan expected to transpire.
“The stronger rand is all Draghi based‚ with markets expecting that he is going to do something. There are a lot of rumours that he may announce unlimited bond buying‚ which would be good for the euro‚ and therefore the rand‚” said Mark Kalkwarf‚ senior portfolio manager at the Iquad Group.
At 11:54‚ the rand was bid at R8.3668 to the dollar from R8.3919 at Wednesday’s close. It was bid at R10.5473 to the euro from its previous close of R10.5722 and at R13.2983 against sterling from R13.3465 before.
The euro was bid at $1.2612 from $1.2595 at Wednesday’s close.
Credit Suisse said in a note that the ECB’s monetary policy decision was expected to bring more clarity concerning the conditions for sovereign bond purchases.
“Besides that‚ we expect a cut in the main refinancing rate to 0.5%‚ with the rate on deposits remaining at 0%. Additionally‚ the ECB will most likely revise the collateral framework and broaden the pool of eligible securities against which banks can receive liquidity from the central bank. According to unconfirmed media reports‚ ECB officials already indicated that the central bank would announce bond purchases of unlimited size without a specific yield cap and with full sterilisation of the liquidity created through the purchases. The Bank of England is unlikely to announce any changes to its bank rate or asset purchase target‚” the bank said.