The rand weakened by more than 10 cents against the US dollar in the afternoon session on Thursday before recovering slightly after the European Central Bank took no immediate action to deal with the eurozone crisis.
The local currency‚ along with the euro‚ had initially firmed when the ECB’s Mario Draghi began his speech before weakening again towards the end.
At 16:13 local time the rand was bid at R8.3475 to the dollar‚ from R8.3305. It was bid at R10.1912 to the euro from R10.1912 and at R12.9769 against sterling from R12.9444.
The euro was bid at US$1.2219 from $1.2236 on Wednesday.
Draghi pledged to draw up a set of additional unconventional measures to preserve the common currency‚ Dow Jones Newswires reported. He also said the ECB was ready to restart its purchases of government bonds on the secondary market‚ when necessary.
But this was far from the explosive action the market had been expecting.
Bonds little moved after Draghi speech
South African bonds hardly moved on Thursday afternoon‚ but traded slightly softer on the day‚ after no dramatic plans were announced by European Central Bank President Mario Draghi to bail out the eurozone.
“The bond market has been treading water for most of the week in anticipation of the Fed and ECB yesterday and today. Nothing much happened after Draghi’s speech ... bonds were slightly softer today on the back of a weaker rand‚” said Steve Arnold‚ head of bonds at Investec.
Italian and Spanish bonds took at beating after the Draghi presser‚ down 20-25 basis points.
Draghi on Thursday afternoon did indicate that the central bank was ready to restart its much-debated purchases of government bonds on the secondary market to bring “exceptionally high” borrowing costs of financially stressed eurozone economies down. However‚ he added that the ECB would not go beyond its mandate on bond buying.
He said that bond buys would focus on the short-end of the yield curve to restrict it to monetary policy and that ECB bond buys would start when governments had fulfilled necessary conditions.
At 16:10 the benchmark R157 bond was trading at 5.530 percent from Wednesday’s close of 5.500 percent. The R207 was trading at 6.520 percent from its previous close of 6.480 percent and the R186 was trading at 7.390 percent‚ from its previous close of 7.330 percent.