The rand was weaker at midday with traders awaiting news from the 19th European Union summit starting tonight.
“The rand is being held hostage by the euro‚ with the euro dropping quite a bit‚” a local trader said.
At 12:15 the rand was bid at R8.4330 to the dollar from its previous close of R8.4278. It was bid at R10.4807 to the euro from its previous close of R10.5137 and at R13.1001 against sterling from R13.1253 before. The euro was bid at US$1.2426 from its previous close of $1.2473.
Rand Merchant Bank said in a note the bias remained for slow rand gains and trade today would remain constrained because of the EU summit.
“Germany takes on France‚ Spain and Italy in today’s Euro 19 summit. But expectations are so low that the only possibility is for a positive surprise. Any goals‚ own or otherwise‚ are likely to come only in tomorrow’s second half‚” the bank said.
Standard Bank said with the EU summit upon us‚ markets seemed torn between hoping for a positive outcome from the summit and expecting nothing concrete to emerge‚ as seen from so many other summits.
Bonds firm despite softer rand, bad auction
South African bonds were firmer in midday trade on Thursday despite a softer rand and a bad switch auction.
Last week the Treasury offered to switch R10 billion of R201 bonds into R186, R209 and R214 bonds. It was however only able to switch R570 million. This week it aimed to switch R10 billion of R201 bonds into R2023 and R214 bonds, but only switched R350 million into R2023 bonds.
“All the evidence shows that bonds should be weaker, so as Sherlock Holmes would say ’once you have eliminated all the suspects except one, then you have your criminal’, so in this case that means it is foreign demand,” a local trader said.
At 12:01, the benchmark R157 bond was trading at 5.990 percent from Wednesday’s close of 6.010 percent and Tuesday’s close of 6.060 percent. The R207 was bid at 7.160 percent and offered at 7.140 percent from a previous close of 7.170 percent and the R186 was trading at 7.980 percent from its previous close of 8.010 percent.