Rand shrugs off political fears
Sep 22 2008 09:37
Johannesburg - The rand was steady in early trade on Monday, with little reaction so far to what has been a dramatic weekend in South African politics with the ANC's NEC recalling President Thabo Mbeki and Mbeki resigning in a farewell address to the nation on Sunday night.
Markets are preoccupied with international events after the turmoil of the past two weeks.
A local rand trader said he expects a volatile day for the rand. He added that the political developments might just have come at a good time for the rand when focus is very much on the big global picture.
"It's difficult to set a range for the rand. We are looking at R7.98 to R8.08 to start and then we'll see what happens with the rest of the world," he added.
By 09:00 the rand was bid at R8.0020 to the dollar from a previous close of R8.0366. It was bid at R11.6389 to the euro from a previous R11.6345 and at R14.7113 against sterling from R14.7215 before.
The euro was bid at $1.4521 from $1.4490 overnight, while gold was quoted at $872.70 a troy ounce from $871.85/oz overnight.
The rand firmed sharply against major currencies on Friday afternoon, trading briefly below the R7.90 level, as investors rediscovered their appetite after reports that the US Treasury is mounting a rescue plan for ailing banks and news that the US central bank will irrigate the market with dollars. At 18:00 local time on Friday the rand was bid around R7.97 per dollar. It had struck R8.35 to the dollar on Thursday.
Dow Jones Newswires reported on Monday that the euro is up slightly against the dollar, with some importers in Japan helping to bid up the currency, a senior dealer said on Monday. For broader dealing, traders say investors are waiting for more clarity in the US financial rescue plan.
On Friday, the yen tumbled to multisession lows after the US government announced measures designed to stem the turmoil in financial markets.
"This is a time to take risk only very selectively and very tactically," said UBS foreign exchange strategist Roderick Ngotho.
"We expect that despite the actions of global monetary authorities the markets will continue to place a premium on liquidity," he said.
Credit Suisse analysts added, "[The government] may halt the implosion of the US financial system, but the extensive damage to risk appetite among lenders and US households will likely not fully reverse quickly."
RMB analysts said in their morning report that they expect a small negative knee-jerk reaction this morning to the Mbeki resignation.
"The Nicholson judgement a week ago on Friday sets the tone, the rand having lost around 5c on the day, with newswires reporting that this was on uncertainty over what policies a Zuma administration would follow. Moody's has expressed much the same concern this morning and international papers are taking the same line," they said.,
They added that attention has been so much on the subprime problems that South Africa's political problems understandably aren't headline news. Having said that international investors are well used to emerging market political risk. The markets will also be comforted by the fact that Finance Minister Manuel said he will stay, by the likely reduction in infighting and just possibly by the fact that a Zuma trial may not go ahead.
- I-Net Bridge
