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Johannesburg‚ July 6 (I-Net Bridge) – The rand was sharply weaker in midday trade on depressed global sentiment‚ while markets await crucial US employment data to be released this afternoon.
The European Central Bank (ECB) yesterday cut rates by 25 basis points to a record low of 0.75%‚ but the move upset the global sentiment as more measures to ease the moribund eurozone economy were expected.
At 12:35‚ the rand was bid at R8.2376 to the dollar from its previous close of R8.1347 - 1.31% or 10 cents weaker. It was bid at R10.1912 to the euro from its previous close of R10.0690 and at R12.7959 against sterling from R12.6167 before.
The euro was bid at $1.2377 from its previous close of $1.383.
Barclays Bank said central banks from three of the largest global economies (China‚ the euro area and the UK) eased policy yesterday. Despite their efforts‚ risky assets across markets are trading weaker‚ the USD is stronger and volatility higher.
“For one‚ most of the measures contained few surprises and were largely expected by the market. While the benchmark rate cut in China was earlier than expected and the size of the deposit rate cut by the ECB was slightly larger many looked for‚ the pace of announced asset purchases by the BoE (done over four months versus three months) was slower than expected‚” Barclays said.
“We have traded weaker but slightly better than expected. Risk positions are prevalent at the moment ahead of the non farm payroll data. The markets‚ however‚ are being largely driven by what is going on in Europe‚” a local trader said.
The euro remained under pressure versus the dollar and the yen Friday in Asia as market participants digested easing steps by several central banks Thursday‚ including the European Central Bank‚ and awaited key US. jobs data later in the global day‚ according to Dow Jones Newswires.
Central banks in China‚ the euro zone‚ the UK. and other countries took new steps to support growth amid mounting concerns about the global economy.
Two developments‚ in particular‚ sent the common currency lower and kept it under pressure‚ said Takao Yahata‚ chief manager of forex and financial products trading at Mitsubishi UFJ Trust and Banking.
"One is (European Central Bank President Mario) Draghi's comments and the other is the ECB outcome of cutting the deposit rate to 0%‚" he said. "(Mr. Draghi) said they didn't discuss the possibility of non-conventional policy measures...For which there had been some expectations."
