Rangy rand tracks euro/dollar

Johannesburg - The rand was range bound on Friday morning, tracking the euro/dollar play. A local trader noted very little economic data about to provide significant direction.

At 08:50 the rand was bid at 7.5100 to the dollar from 7.5222 at its previous close. It was bid at 11.2020 to the euro from its previous close of 11.2325 and was at 12.4998 against sterling from 12.5395.

The euro was bid at $1.4912 from $1.4914 overnight.

A local trader said: "We were a touch weaker on the crosses, but that seems to have stopped now. The rand is tracking the euro against the dollar, but is still in a range of 7.48-7.58 against the greenback."

He noted very little economic data about to provide significant direction.

RMB analysts John Cairns and Nema Ramkhelawan in a morning report noted that the Sarb had expressed concern over the dire effects of a stronger rand on certain key sectors within the economy, however they have remained steadfast in their view that the rand was a product of global forces.

"Moreover, SARB intervention might not be necessary given the OECD's assessment of South Africa. While the organisation estimates a 2.7% increase in GDP growth next year as well as a sizeable reduction in the budget deficit over the next few years, they are quick to point out that South Africa remains susceptible to speculative flows and sharp currency deprecation should investor confidence, which has supported riskier assets, turn," the analysts said.

"Although euro/US dollar remains buoyant at 1.49 it does not appear to have the energy to conquer 1.50. The rand remains trapped in a narrow range as volatility remains depressed. A lack of event risk suggests that it is likely to remain elevated above 7.50 today," Cairns and Ramkhelawan concluded.

Dow Jones Newswires reports that the euro fell against the yen and the dollar in Asia on Friday, as sluggish Asian shares reduced risk appetite and boosted demand for the safe-heaven US and Japanese currencies, while Japanese exporters sold the European unit to settle accounts.

If global share prices continue to languish next week, the euro could head lower toward ¥130.00 and $1.4600, some traders said. The European currency was trading at ¥132.61 and $1.4919 at 04:50 GMT, lower than its late New York levels of ¥132.85 and $1.4925 on Thursday.

Everything happening in the currency market "can be explained by stock moves today," said Koji Takeuchi, a senior economist at Mizuho Research Institute.

"Players were unwinding euro-holdings that they had accumulated in past weeks as falls in regional shares dented players' risk-tolerance."

- I-Net Bridge