The rand was flat against the dollar in early morning trade on Monday, as the local currency tracked a jittery euro.
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Rand tad softer vs dollar on US data
"The euro zone problems seem to be getting worse with debt concerns in Italy coming into the spotlight and that has dragged the euro down," a local currency trader said.
He put dollar rand range at R6.69 to R6.76 for the rest of the session.
At 8.36am local time, the rand was bid at R6.7262/$ from its previous close of R6.7168/$. It was bid at R9.5428/€ from R9.5616/€ before, and at R10.7197/£ from R10.7598/£ previously. The euro was at $1.4187 from $1.4200.
Standard Bank analysts noted in a morning report that yet another disappointing US employment report on Friday had stopped rand bulls in their tracks at R6.65 on the bid chart, the same level at which they had repeatedly run out of momentum in early June.
"Hence, the rand remains in a R6.65/R7.05 range, which is part of a broader six-month range of R6.54/R7.40. We still argue that participants should play these ranges accordingly, which implies that at current levels, importers should cover forward while exporters should wait for better levels before repatriating their dollar earnings."
Standard Bank added that Friday's poor US non-farm payrolls data did not bode well for the global economic recovery.
"This, combined with reports that the ECB might need to provide additional assistance for debt-laden Italy, has seen risk aversion return. Indeed, the dollar, gold price and Swiss franc are benefiting from their traditional safe-haven status, while risky asset classes such as equities and emerging market currencies are selling off."
Standard Bank said that as a result of gloomy international sentiment, it would target R6.76 in the near term.
"If breached to the upside, R6.83 if not R6.87 would become plausible. With only local manufacturing data due out this week, the rand will probably continue taking direction from the level of international sentiment."
Meanwhile Dow Jones Newswires reported that the euro fell against the dollar and yen on Monday in Asia due to worries over debt crisis contagion in Europe as investors speculated that senior European officials might accept a partial default of Greek debt later in the day.
All eyes were on an emergency meeting of top European leaders called by European Council President Herman Van Rompuy for later in the global day following a Financial Times report on Sunday suggesting that the officials may allow Athens to default on some of its bonds.
While the likelihood of such a decision was unclear, the calling of a meeting that appeared to fit in with the speculation "is just a very bad scenario for the euro," said Kenichiro Ikezawa, a fund manager at Daiwa SB Investments.
If the speculation turned out to be correct, concern would intensify that debt problems in Europe would get more severe and spread to other nations such as Italy, traders said.
"Contagion, contagion, contagion. That's the word we're scared of right now," Ikezawa said.`
