Rangy rand keeps tabs on euro

Johannesburg - The rand continued its range bound trade in the afternoon session on Tuesday, tracking the euro for direction.

At 15:40 the rand was bid at R7.3837 to the dollar from R7.3980 at its previous close. It was bid at R10.1361 to the euro from its previous close of R10.1165 and was at R11.1740 against the sterling from R11.1302.

The euro was bid at $1.3721 from $1.3673 previously.

A local currency trader said the rand continued to trade within a tight range of R7.38-R7.42 against the dollar, keeping a watchful eye on the euro for any signs of direction.

Dow Jones Newswires reported that the euro managed to gain on the dollar on Tuesday after German data that indicates the economic recovery continues, only at a slower pace.

For the remainder of the New York session, currencies are likely to remain in tight ranges as investors await the rate decision and the accompanying statement from the Federal Open Market Committee.

The Fed committee isn't expected to raise ultra-low key interest rates, but investors will zero in on any change in the statement that accompanies the rate decision. Some analysts expect the Fed to issue a slightly more rosy assessment of the economy.

"The market will also be watching for other clues of tighter policy," said Camilla Sutton, currency strategist at Scotia Capital in Toronto, with the Fed expected to possibly announce steps toward sopping up some of the emergency liquidity that flooded the system in the wake of the financial crisis.

Tuesday morning, the euro was at $1.3719 from $1.3670 late on Monday, according to EBS via CQG. The dollar was at ¥90.56 from ¥90.48, while the euro was at ¥124.23 from ¥123.69.

German economic expectations deteriorated in March, indicating the economic recovery is slowing, but the index didn't slip as far as economists had expected, which helped give the euro a boost.

The ZEW think-tank said on Tuesday that its economic expectations index declined for the sixth straight month, to 44.5 points in March from 45.1 points in February; the outcome was above the 43.0 forecast by economists.

Economists said it signals the recovery will continue, albeit at slower place.

The euro rose after the better-than-expected data, increasing to $1.3704 from $1.3690 minutes ahead of the ZEW release.

"German business activity has moved from intensive care unit to rehab. But it is still far from full recovery," ZEW President Wolfgang Franz said.

Meanwhile, euro zone finance ministers, during their regular monthly meeting, failed to offer the euro much support as they focused on "technical" issues that might come up if Greece needs help financing its debt burden, according to Luxembourg's Prime Minister Jean-Claude Juncker, who chaired the meeting.

- I-Net Bridge