The rand was firmer in quiet morning trade on Wednesday ahead of the European Central Bank (ECB) Council decision on interest rates and increased medium-term liquidity provision.
“The euro is so far sticking near the 1.25 per dollar level but I have no idea where it will be this afternoon as there are so many variations on what the ECB can and should do,” a local trader said.
At 09:16 the rand was bid at R8.3877 to the dollar from Tuesday’s close of R8.4443, Monday’s close of R8.4758, Friday’s close of R8.5721 and Thursday’s close of 8.5006.
It was bid at R10.4754 to the euro from its previous close of R10.5100, and at R12.9331 against sterling from R12.9813 at its previous close. The euro was bid at US$1.2480 from Tuesday’s close of $1.2450, Monday’s close of $1.2504, Friday’s close of $1.2418 and Thursday’s close of $1.2364.
Dow Jones Newswires reported that the euro gained against the dollar and the yen in Asia on Wednesday as investors tiptoed back into the single currency amid expectation that the ECB will take fresh easing action later in the day to calm market jitters.
With signs that global economic growth is being slowed by the European debt crisis, traders are looking at a possible wave of new easing measures by global central banks as a cue to position themselves for improving risk sentiment.
“Regardless of whether the ECB acts or not, expectations for further easing action have been fairly strong, prompting traders to unwind euro shorts,” said Kuniyuki Hirai, manager of the foreign exchange trading department at Bank of Tokyo-Mitsubishi UFJ.
The ECB's rate-setting meeting, scheduled to take place later on Wednesday, comes after the Reserve Bank of Australia on Tuesday decided to cut its key interest rate by 25 basis points. The Bank of Japan and the US Federal Reserve will hold their policy meetings later in the month.
Some analysts think the ECB could cut rates in a bid to help stabilise market sentiment.
“We are looking for at least a 25-basis-point cut,” said Christopher Vecchio, currency Analyst at DailyFX.
“But if the ECB chooses to sit on its hands again, it will be a very poor day for risk-correlated assets, and the euro could slip to fresh 2012 lows near $1.20.”
Bonds firm ahead of ECB decision
South African bonds were a touch firmer in quiet morning trade on Wednesday as traders waited for the European Central Bank (ECB) to decide on how to help the eurozone.
At 08:51‚ the benchmark R157 bond was trading at 6.320 percent from Tuesday’s close of 6.330 percent and Monday’s close of 6.355 percent. The R207 was bid at 7.630 percent and offered at 7.605 percent from a previous close of 7.630 percent and the R186 was bid at 8.380 percent and offered at 8.360 percent from its close of 8.385 percent.