Rand subdued as risk aversion rises
Johannesburg - The rand remained subdued around
the R7.90 per dollar level in noon trade on Friday as weaker Chinese
growth data and renewed concerns over Spanish banks restrained the euro.
At 11:38 local time, the rand was bid at R7.9095 to the
dollar from its previous close of R7.8742. It was bid at R10.4067 to the
euro from R10.3804 before, and at R12.5862 against sterling from
The euro was bid at $1.3156 from its Thursday close of $1.3182.
Standard Bank analysts noted in a morning report that after a
brief return in risk appetite yesterday on resurging hopes for further
quantitative easing from central banks, weaker-than-expected growth out
of China restrained the rand's recent appreciation.
"Along with most other commodity currencies, it has retreated this morning," they said.
"China's growth slowed to 8.1% y/y (year-on-year) against a consensus
forecast of 8.4%.
"The hangover from this morning's data is likely to
weigh on the rand ahead of the weekend, with the bias stacked towards
further weakness - unless the slew of speakers (including the Fed's
Bernanke, ECB Knot and BoE Haldane) reinforces expectations of
additional stimulus," they said.
Barclays Capital analysts said they expected the rand to
weaken initially in response to the data, but they are not excessively
rand bearish over the medium term because they still argue that China is
likely to experience a soft landing.
Meanwhile, Dow Jones Newswires reported that the euro slipped
against the dollar after China's first-quarter growth slowed to its
weakest pace in three years, while the woes of Spanish banks returned
after data showed they are increasingly relying on the European Central
Bank for funding.
Chinese data showed gross domestic product growth slowing to
8.1% in the first quarter from 8.9% in the fourth, and below consensus
expectations. The growth rate was the slowest since the first quarter of
"Today's slightly disappointing gross domestic product report
adds to the risks already raised by some poor numbers earlier this year,
that the bottoming-out process could be delayed until the summer," said
Nikolaus Keis, economist at UniCredit Bank.
"And it stresses the
necessity for more policy action by the Chinese authorities to boost
domestic demand... Monetary policy will stay centre stage."
Investors are now hoping that both Chinese and US policymakers will embark on additional easing to kickstart the flagging
health of the world's two strongest economies.