Trader says the rand remained in a rather uncomfortable position as the end of the trading session neared
The rand remained softer against the dollar in late afternoon trade on Thursday as it tracked a sagging euro that had been engulfed in the confusion of the Greek bailout.
"Both the euro and the rand have had a difficult time, with the single currency drifting below the psychological level of US$1.30," a local currency trader said.
"The continued woes in Greece have definitely put the brakes on the risk-on scenario," he added.
The trader said the rand remained in "a rather uncomfortable position" as the end of the trading session neared.
At 15:39 local time, the rand was bid at R7.8351/$ from its previous close of R7.7619/$. It was bid at R10.1906/€ from R10.1273/€ before, and at R12.2736/£ from R12.1638/£ previously.
The euro was bid at $1.3002 from its previous close of $1.3054.
Meanwhile Dow Jones Newswires reported that the euro had traded at a three-week low against the dollar and slipped below the significant $1.30 level on Thursday as Greek confusion and bank-rating fears created a toxic mix for the currency.
The selloff started on Wednesday, after European finance ministers failed to come to an agreement about Greece's latest bailout package. A decision by Moody's Investors Service to place 114 European financial institutions on review for downgrade early on Thursday threw fuel on the fire.
The next finance ministers' meeting was scheduled for Monday, and investors were hoping to get some clarity about how the aid package would be administered.
"Failure to secure a deal at the Euro group meeting could unleash another wave of euro selling, given markets are taking a dim view of Greece entering election season without funding," analysts at ING Bank NV wrote in a note to clients.
The confusion centred on whether the country would get its EUR130 billion loan tranche before its March 20 bond redemption payments became due, or whether European creditors would extend a bridging loan to the country and hand over the rest of the money after the country's elections in April. On Thursday, the Dutch finance minister said delays could not be ruled out.
"I'm fairly confident that [the euro] will go lower from here. There might be a blip when we get a package announced, but that's definitely my sense," said Neil Mellor, a currency strategist at the Bank of New York Mellon in London. Like many other analysts, Mellor pointed out that $1.26 - the year's low - was widely seen as euro bears' next big target.
Still, some market watchers were reluctant to punish the euro much more from here.
"We are in the lower end of the last five- to six-week range, but I would be reluctant to add to short positions at these levels," said Ankita Dudani, a currency strategist at the Royal Bank of Scotland in London.
Thursday's selloff stabilised somewhat after Spain successfully auctioned around four billion euros of bonds and as Greek officials expressed confidence that there would not be any delays in the aid process. But the fact remained that US traders could easily hammer the common currency further from current levels.
Meanwhile, the Swedish central bank cut its key interest rate to 1.5% from 1.75%, as it sought to protect the Swedish economy from spill over effects stemming from the eurozone crisis.
Emerging market currencies adopted a softer tone in line with the euro, with the Czech koruna, the Hungarian forint and the Polish zloty coming under pressure against the single currency.
