Johannesburg - A softer rand tracked the euro in the morning session on Monday. The local currency is expected to trade towards the topside of its current range of R7.70 to R7.80 against the dollar, a local trader noted.
At 09:00 the rand was bid at R7.7591 to the dollar from R7.7466 at its previous close. It was bid at R10.5774 to the euro from its previous close of R10.5847 and was at R12.0482 against the sterling from R12.0951.
The euro was bid at $1.3629 from $1.3642 previously.
A local currency trader said: "We have seen a few export orders coming in, with the local currency tracking the euro this morning.
If we break R7.78 against the dollar, we could push to R7.88, but for now the range is at R7.70-R7.80.
RMB analysts noted in their morning report that US dollar/rand's break of its R7.25 - R7.76 range potentially opens up the way for moves to R8.00.
"This is all a story of Euro/US dollar, which has shed over 10% since its $1.5145 high seen in November. And there seems to be no stopping the adjustment," analysts John Cairns and Nema Ramkhelawan said.
While Greece got begrudging approval for its budget last week and continues to get verbal support from EU policymakers, attention has switched to Portugal and Spain. They noted that fiscal conditions in these countries were not as severe as in Greece but their political will to deal with the problems
was lower. "As a result, futures positioning data shows speculators increasingly turning against the euro," they said.
Monitor closely
"With US dollar/rand now fully attached, every Euro/US dollar move is going to be reflected directly. This implies we are betting on European credit spreads - a function mostly just of sentiment. We will receive eurozone GDP data this week and the relative performance of the troubled countries might
affect. In this environment, US data seems to be having a smaller impact.
"The downward revisions of the US non-farm employment data on Friday barely caused a blip and so we can probably expect US retail sales data on Thursday to likewise be overshadowed by eurozone problems," Cairns and Ramkhelawan concluded.
Dow Jones Newswires reports that the euro fell against the dollar and the yen in Asia on Monday as European authorities at the weekend meeting of financial heads from the Group of Seven failed to offer realistic plans to help Greece out of its debt woes.
European Central Bank President Jean-Claude Trichet said on Saturday in Iqaluit, Canada, where the G-7 meeting was held, the ECB expects "the Greek government will take all necessary decisions" to cut its debt burden, while the ECB "will continue to monitor closely" these steps.
Last week, Greece told the European Commission it would decrease its debt to 3% of gross domestic product from 13% currently. But market participants don't believe the plan is realistic, continuing to exert downward pressure on the European common currency, dealers said.
"History shows that drastic cuts of deficits in such a short period have mostly been impossible," said Tomoki Ohashi, a senior dealer at Bank of Tokyo-Mitsubishi UFJ. "It's difficult to find market participants who are confident in Greece's plan."
As of 04:50 GMT, the euro was at $1.3642 from $1.3663 in New York on Friday and ¥121.89 from ¥122.14. The unit may fall below $1.3500 and ¥120.00 in the coming days, said Yuji Saito, head of foreign exchange at Credit Agricole Cib.
Meanwhile, the safe-haven yen should rise this week as China's economic trade data and inflation reports due Wednesday and Thursday may add to investors' risk aversion, analysts said.
China's data due this week "will probably foster perceptions of inflationary pressure and concerns about policy tightening, which are yen-positive factors," said Tomoko Fujii, a strategist at Bank of America-Merrill Lynch.
- I-Net Bridge