Steady rand tracks dollar

Johannesburg - The rand was virtually unchanged in the morning session on Monday, with an eye on US dollar movement.

At 08:55 the rand was bid at 7.3201 to the dollar from 7.3300 at its previous close. It was bid at €10.9163 to the euro from its previous close of €10.9220 and was at £11.9323 against sterling from £11.9510.

The euro was bid at $1.4914 from $1.4892 overnight.

A local trader said: "It's a very quiet start this morning. The rand looks rangy. Interest rates are out later this week, but it shouldn't have to much of an effect on base currencies."

RMB analayst Bulent Badsha said: "The global risk environment remains supportive of the rand at current levels. Despite being overvalued, the favourable tailwinds provided by the low level of policy rates in the developed world have allowed US dollar/rand to trade in the current low range. The run-up in global commodity prices, favourable positioning towards emerging markets assets, and still relatively attractive carry on offer makes it understandable why the rand has traded on a sustainable basis below the US dollar/rand 8.00 level."

"Despite the favourable exchange rate at which the Sarb could purchase foreign exchange reserves, the Bank has not featured with any real prominence in the open market, with open-mouth operations having had more of an impact than open-market ones," Badsha said.

"The rand remains susceptible to the vagaries of the global economic outlook as measured by global risk barometers. The key risks to the market this week are the local MPC rate announcement and the continuation of the US earnings season. We expect US dollar/rand to trade within a range of 7.32 and 7.42 today," Badsha concluded.

International currencies

Dow Jones Newswire reports that the euro fell against the yen and dollar in Asia on Monday, as players sold the common currency to lock in profits amid speculation European authorities may face increasing pressure to rein in the unit's recent strength.

Some short-term players in Asia were concerned that eurozone finance ministers convening at a regular meeting later in the day in Luxembourg could fire warning shots over euro strength, dealers said.

That could ramp up pressure on the European Central Bank to consider steps to curb any further rises in the currency, they said.

After the euro surged on Friday to its highest levels in 14 months against the dollar and two months against the yen, the strength of the common currency, which hurts eurozone exporters, is now facing increased scrutiny.

For the rest of the week, players will be watching for any further clues on US monetary policy from a series of speeches by US Federal Reserve officials, dealers said. Chief among them, Fed Chairman Ben Bernanke is slated to speak in San Francisco on Monday and at the Boston Fed conference on Friday.

Any hints that interest rate hikes may come sooner than expected could in the longer-term boost the dollar's appeal against presently higher-yielding rivals such as the euro and Australian dollar, dealers said.

- I-Net Bridge