The rand was firmer in early trade on Tuesday on improved global sentiment ahead of a European Central Bank (ECB) meeting later in the week‚ which is expected to cut rates.
“There is a lot of optimism globally‚ the ECB is expected cut to rates on Thursday and people are taking more risk - that’s why the rand is benefiting. People are taking risks on emerging markets‚” Henry Flint of Thebe Stockbrockers said.
At 08:50‚ the rand was bid at R8.0925 to the dollar from its previous close of R8.1505. It was bid at R10.1952 to the euro from its previous close of R10.2549 and at R12.6928 against sterling from R12.7865 before.
Gold was trading at US$1607.09 per ounce.
The euro was bid at US$1.2604 from its previous close of $1.2584.
RMB said in its morning report that the rand was holding up well‚ shrugging off the weakness in the euro‚ poor global economic data and the decline in post-summit optimism.
“We’re at the bottom end of that range this morning but there’s no obvious direction: global markets are moving sideways‚ the data and events calendar is empty‚ and trade is likely to be constrained ahead of tomorrow’s US Independence Day holiday‚” RMB said.
Dow Jones Newswires reports that the yen was weaker against major currencies in Asia on Tuesday as investors continued to prefer high-yielding currencies despite dismal US economic data on Monday and fading optimism over last week’s agreement by European leaders to solve the eurozone debt and banking problems.
“Sentiment hasn’t completely turned to risk-off as US equities showed resilience despite the soft manufacturing report‚” said a currency manager at a Japanese bank.
The Asian stock market also maintained small to modest gains on Tuesday.
At 0450GMT‚ the dollar was at Y79.72‚ against Y79.50 late in New York on Monday‚ according to trading system EBS. The euro was at Y100.41 against Y100.03. The single currency was at $1.2596 against $1.2573.
The Japanese currency‚ seen as a safe-haven currency amid global uncertainty‚ failed to rally overseas on Monday after the Institute for Supply Management’s index of US manufacturing activity dropped in June to 49.7‚ its lowest level since July 2009‚ from 53.5 in May.
The past pattern‚ in which the yen tends to rise amid weak US economic data‚ was “not holding true”‚ said Minori Uchida‚ chief analyst at the Bank of Tokyo-Mitsubishi UFJ.
Reports that the Netherlands and Finland planned to block elements of the rescue package agreed last week for euro countries also damped risk sentiment on Monday‚ but its impact was also minimal in Asia.
Still‚ dealers said thin trading volumes may exaggerate price movements ahead of the US Independence Day holiday on Wednesday‚ the ECB policy-setting meeting on Thursday and Friday’s US nonfarm payrolls report.
Bonds firm on foreigners
South African bonds were firm in morning trade on Tuesday‚ as yield-seeking foreigners helped both the rand and bonds.
“We started firmer as foreigners are searching for yield and we still offer some of the best yields around‚” a local trader said.
At 08:45‚ the benchmark R157 bond was trading at 5.990 percent from Monday’s close of 6.020 percent and Friday’s close of 6.000 percent. The R207 was bid at 7.085 percent and offered at 7.055 percent from a previous close of 7.100 percent and the R186 was trading at 7.900 percent from its previous close of 7.940 percent.