The rand retreated in afternoon trade on Monday after gains in the morning as a possible Moody’s downgrade of Spanish debt dampened the euro. The local currency tends to take direction from the euro as the eurozone is one of South Africa’s biggest trading partners.
At 16:12 the rand was bid at R8.3958 to the dollar from Friday’s close of R8.3147. It was bid at R10.5285 to the euro from its previous close of R10.5058 on Friday and at R13.0413 against sterling from R12.9228 at its previous close. The euro was bid at US$1.2542 from Friday’s close of $1.2636.
“The rand has given back some of its gains with negative risk playing into the rand‚” a local trader said.
There is plenty of data that will be released this week‚ such as the American CPI‚ which is causing uncertainty in the market‚ and the Greek elections coming up this weekend.
Dow Jones reports that Spain's acquiescence to a bailout of as much as $125bn for its banks is a prelude to a much bigger question: Will Spain need a bailout for itself? Spain is in its predicament because its banks made real-estate loans that went bad‚ but that is not the whole story. Spain also made a series of miscalculations in responding to its banking crisis. By asking the eurozone for a loan of up to EUR100bn ($125bn) to recapitalise its banks‚ Madrid has acknowledged what the market already knew: that Spanish bank balance sheets have been massively understating the losses arising from the country's property bust.
The newswire also reports that the European Commission says the so-called "troika" that includes the ECB and the IMF will monitor Spain's EUR100bn banking bailout‚ suggesting the deal agreed over the weekend may be more stringent than signalled by Madrid. Meanwhile US stock futures were extending a global rally as investors cheered Spain's agreement to seek bailout funds for its troubled banks. Markets in Europe and Asia were also higher. Crude oil futures also trade higher‚ bolstered by the Spanish government's agreement to request a bailout for its banks over the weekend‚ alleviating some of the immediate concerns about the region's economy. However‚ the Chinese and Indian economies were likely to grow more slowly in coming months‚ according to the Organisation for Economic Cooperation and Development's composite leading indicators.