Rand retreats from early peaks as US dollar selling fizzles out

JOHANNESBURG – The rand retreated from early peaks yesterday as offshore dollar selling fizzled out in thin market conditions with the euro pinned near five-month lows against the greenback, traders said.

At 5pm the rand was trading at R6,6891 a dollar compared with R6,77 at close on Friday. It pushed to an intraday level of R6,65 a dollar, driven by a combination of offshore buying and export dollar inflows.Volumes were thin ahead of yesterday’s holiday to mark 10 years of democracy as President Thabo Mbeki will be sworn in for a second term in office.Mbeki’s new cabinet is likely to be unveiled today, with finance minister Trevor Manuel expected to keep his post, which he has held since 1996.”We have seen offshore dollar selling and smaller exports, but the rand is still in a bit of a range.The market will continue to keep an eye on the euro,” said Caroline Gorman, an analyst at 4Cast in London.The dollar surged to a five-month peak against the euro yesterday, bolstered by recent upbeat US data after a weekend Group of Seven meeting put no obstacles in its recovery path.Already nursing losses from the previous week, the euro fell towards US$1,1760 – its lowest since November – before a better-than-expected German business sentiment survey allowed it to recover its footing.The euro is the currency of South Africa’s main trade partner and often sets the tone for the rand.”It has depreciated in a short period of time.On balance we think that the rand will probably enjoy some appreciation bias over the short term,” said Goolam Ballim, an economist at SCMB.Analysts said the rand had also received support from reports that Russia’s Norilsk was keen to take control of mining group Gold Fields.Government bonds were little changed, with analysts saying poor global sentiment had restrained the domestic market’s rally after Thursday’s dovish central bank monetary policy committee (MPC) statement suggesting no rate increases this year.The MPC painted a benign inflation outlook for the market, which had priced in a series of hikes in the repo rate from the middle of this year.The yield on the R194 strengthened by 2 basis points at 9,67 per cent while the yield on the R153 was up 3 basis points at 9,72 per cent.- Nampa-ReutersIt pushed to an intraday level of R6,65 a dollar, driven by a combination of offshore buying and export dollar inflows.Volumes were thin ahead of yesterday’s holiday to mark 10 years of democracy as President Thabo Mbeki will be sworn in for a second term in office.Mbeki’s new cabinet is likely to be unveiled today, with finance minister Trevor Manuel expected to keep his post, which he has held since 1996.”We have seen offshore dollar selling and smaller exports, but the rand is still in a bit of a range.The market will continue to keep an eye on the euro,” said Caroline Gorman, an analyst at 4Cast in London.The dollar surged to a five-month peak against the euro yesterday, bolstered by recent upbeat US data after a weekend Group of Seven meeting put no obstacles in its recovery path.Already nursing losses from the previous week, the euro fell towards US$1,1760 – its lowest since November – before a better-than-expected German business sentiment survey allowed it to recover its footing. The euro is the currency of South Africa’s main trade partner and often sets the tone for the rand.”It has depreciated in a short period of time.On balance we think that the rand will probably enjoy some appreciation bias over the short term,” said Goolam Ballim, an economist at SCMB.Analysts said the rand had also received support from reports that Russia’s Norilsk was keen to take control of mining group Gold Fields.Government bonds were little changed, with analysts saying poor global sentiment had restrained the domestic market’s rally after Thursday’s dovish central bank monetary policy committee (MPC) statement suggesting no rate increases this year.The MPC painted a benign inflation outlook for the market, which had priced in a series of hikes in the repo rate from the middle of this year.The yield on the R194 strengthened by 2 basis points at 9,67 per cent while the yield on the R153 was up 3 basis points at 9,72 per cent.- Nampa-Reuters