The rand was firmer in midday trade on a slightly more risk-on market following news that pro-austerity parties in Greece were the front runners ahead of next month’s poll, although the currency market was ‘lacklustre’, a local trader said.
‘Markets are slightly more comfortable with higher risk’, the trader said. He added that sellers of dollars in the slightly more risk-on market - combined with low liquidity of the euro - were the main drivers in an otherwise lacklustre market that was not being driven by anything in particular.
At 11:43 the rand was bid at R8.3057 to the dollar from Friday’s close of 8.3547.
It was bid at R10.4386 to the euro from Friday’s close of R10.5058 and at R13.0251 against sterling from R13.1088 at the previous close.
The euro was unchanged from Friday’s close at US$1.2575.
In their morning report Absa Capital said the rand weakened a further 1.2 percent versus the dollar last week and was now 6.6 percent down versus the US$ month-to-date. The bank, however, noted the rand strengthened by 0.6 percent against the euro last week, but was still down 1.7 percent for the month.
‘These relative performances demonstrate that a significant part of the rand’s weakening in recent weeks has been a function of the stronger US$ environment. Participants have sought the perceived safety of the greenback due to the uncertainty surrounding the global growth outlook and concern about the EU debt crises,’ Absa said.
Dow Jones Newswires reported that Greece was now more likely to leave the eurozone than to stay in it, increasing the risk of "significantly worsening" the current recession in the monetary union, Standard Chartered said in a research note on Monday.
As a result the bank lowered its forecasts for the euro to $1.18 from $1.32 at the end of this year, if the exit is contained.
Standard Chartered said if the Greek exit triggered other countries to leave the union, the currency could sink to as low as $1.08 by the end of 2012.
An exit by Greece would significantly worsen the recession in the eurozone ‘and a wave of exits from the union would see the repeat of the economic downturn in 2008-09’ Standard Chartered said.