Importers sell rand at lower R8 level

2012-07-31 09:18

Johannesburg - The rand was steady and range-bound against the dollar in early Tuesday trade with investors unwilling to take big positions ahead of the release of trade and employment numbers at home and a US monetary policy meeting abroad.

Importers are expected to take advantage of the lower R8 level to buy dollars after oil companies came out to pick up the greenback below R8.20 on Monday.

The rand was at R8.1825 to the dollar at 06:00 GMT,  nearly unchanged from its Monday close of R8.1860 in the New York market.

South African second quarter unemployment data is due at 09:30 GMT. Economists say numbers showing continued job losses will send a signal that consumers may be unable to drive economic growth as much as they did in the past.

The number of job losses in the manufacturing sector will give clues about the extent of the euro on the domestic economy as exports to the debt-ridden region decline.

Investors are also watching the start of a two-day US Federal Reserve policy meeting where expectations are for the Fed to announce stimulus to bolster the world’s biggest economy.

The market wants to see how the European Central Bank will make good on comments it made last week when it said it will do all it could to save the euro. The Bank holds a policy-setting meeting on Thursday.

"The most bullish outcome for markets in the short-term would be a scenario where both the Fed and the ECB ease policy further. With markets widely expecting more easing, conditions are ripe for disappointment," research house Tradition Analytics said.

If the central banks do not loosen monetary policy, risky assets will take a hit and the rand could shoot to R8.30, opening the door to a retest of R8.50 levels from last week.

Government bonds were steady along with the rand. The three-year yield was at 5.47% while the 2026 bond held onto 7.325%. Yields are likely to trend lower if the ECB and Federal Reserve provide financial stimulus as cheap money would likely end up in emerging markets.

Treasury will hold a weekly auction at 09:00 GMT. The 2023, 2031 and 2048 bonds are on offer.

At 12:00 GMT, the national statistics agency will release trade data for June, which is expected to show another deficit after a R8.9bn gap in May. Europe’s debt woes have resulted in fewer exports to the region.