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Risk aversion, strikes keep rand down

Jul 18 2011 12:46 I-Net Bridge

Company Data

Stanbank [JSE : SBK]

Last traded R113.00
Change R0.00
% Change 0.00%
Cumulative volume 1.71m
Market cap R179.93bn

Last Updated: 28/05/2012 at 17:43. Prices are delayed by 15 minutes. Source: McGregor BFA

 

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Johannesburg - The rand softened further in midday trade on Monday, in line with the euro which was under pressure as concerns over US and eurozone debts weighed on markets.

In mid-morning trade, the rand was bid at R6.9365/$ from its previous close of R6.8886/$. It was bid at R9.7560 to the euro from R9.7558 before, and at R11.1452 against sterling from R11.1055 previously.

The euro was at $1.4063 from $1.4120.

A local dealer said that as long as the debt issues continued to plague the eurozone, and with the US in negotiations over its debt ceiling, the rand would continue to lose ground.

Michael Keenan, head of forex research at Standard Bank, said that R6.95/$ was a crucial level for the local currency against the dollar. "If we break that level amid the current risk aversion, then R7.08 is on the cards," he said.

Standard Bank analysts said in a morning report that although the rand was still below the psychological R7.00/$ level, momentum remained in favour of rand bears.

"Risk aversion associated with eurozone sovereign debt has culminated in a firmer dollar and higher gold price, while risky assets such as emerging market currencies have sold off.

"However, the rand is weakening more than most of its emerging market peers, which we view as a function of the escalating industrial action in SA."

Standard Bank Group [JSE:SBK] said that, despite metal and engineering workers reportedly returning to work within the next 48 hours after agreeing to a 10% wage increase, wage talks in the oil industry would only resume today. Many petrol stations in Gauteng and Kwazulu-Natal have already run dry.

"We would sell into rand strength (buy dollar dips), with a target of R6.96 in mind. If (it) breached to the upside, a return to R7.08 would be possible over the coming days."

Meanwhile, Dow Jones Newswires reported that in foreign exchange markets the euro could not gain any momentum, with market participants expressing scepticism over the quality of European bank stress tests.




 
 
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