The rand was flat in morning trade after reaching a 14-month low against the dollar yesterday.
The currency fell more than 1% to R7,75 yesterday its weakest since early July 2010, as investors fret about contagion from Europe's debt problems, particularly the spectre of a default by Greece.
By 9:02 on Wednesday in Johannesburg, the local currency was trading at R7,7127 to the dollar from its previous close of 7,7156. It also weakened against the euro at R10,5643, compared to R10,5117; and against the sterling at R12,1131, compared to R12,0938 on Tuesday.
Markets will be eyeing the US Federal Reserve’s Open Market Committee policy decision, due tonight.
"There seems to be growing optimism that Fed Chairman Bernanke will announce some form of additional monetary support to the US economy at the conclusion of the Fed’s FOMC meeting tonight. We anticipate that expectations of further policy action from the Fed will dominate market sentiment today," Standard Bank analysts Michael Keenan, Nomvuyo Guma and Shireen Darmalingam said.
Rand Merchant Bank analysts John Cairns and Nema Ramkhelawan-Bhana said the Fed is expected to announce the selling of short dated securities and the buying of longer dated bonds, aimed at reducing the steepness of the bond yield curve.
"This can be seen as moderate further easing of policy. Some though are hoping that they will go further by suggesting that they are getting close to another round of quantitative easing. Unless this is the case, the most they will do is bring temporary calm to the markets," Cairns and Ramkhelawan-Bhana said.
Cairns and Ramkhelawan-Bhana added Greece will send a new austerity bill to parliament today, opening up the prospect that they may get their next bailout €8bn tranche after creditors complete their formal visit next week.
"Rand underperformance means we hit new highs on both euro/rand and pound/rand yesterday. Both should reverse in line with dollar/rand," Cairns and Ramkhelawan-Bhana said. With Reuters
