Rand range-bound ahead of Greek, US votes

2012-11-06 09:21

Johannesburg - The rand steadied against the dollar in early Tuesday trade, with investors unwilling to take strong positions until after the US election and a Greek vote that will determine whether it receives more bailout assistance.

The outlook for the eurozone, South Africa's biggest trading bloc, was uncertain because of the pending Greek parliamentary vote to approve or reject austerity measures that would unlock aid from the IMF and EU.

The rand was at R8.7363 to the dollar at 06:48 GMT, not far off its R8.7284 close in New York on Monday.

The unit finds support at R8.80, and is unlikely to move out of Monday's range of between R8.70 and R8.80 in this session.

Results of the US election either in favour of Barack Obama or his republican opponent Mitt Romney are likely to elicit only a fleeting reaction in markets as the economy's problems, including the so-called "fiscal cliff", will remain after the election.

"As we head into the US elections the greater ranging activity is being maintained across markets," said Judy Padayachee, technical strategist for Absa Capital.

Although the rand is stuck in a range, a push to weaker levels at about R8.84 is on the charts, Padayachee added.

Recent data out of South Africa does point to prospects for a weaker currency once it manages to break out of the range.

The primary concerns are a wide current account and fiscal deficit, along with increasing joblessness and projected weaker growth because of lower mining output after three months of strikes.

The business confidence index due on Wednesday is likely to drop on the prospects for weaker growth, while economists expect manufacturing activity to have contracted in September, according to data due to be released on Thursday.

Statistics South Africa will release new weightings in the Consumer Price Index basket at 08:30 GMT, based on an updated survey of household spending patterns. The changes come into effect early next year.

Treasury will hold its weekly auction at 09:00 GMT, where it is issuing on the longer end of the yield curve.

Bond yields nudged 0.5 basis points lower to 5.47% on the four-year note and 7.69% on the 2026 issue.

Results of the sale are due after the auction closes at 09:00 GMT.