Rand falls against the dollar, showing a vulnerability that could see it test a three-year low of R8,71 set in June
The rand fell against the dollar in early Wednesday trade, showing a vulnerability that could see it test a three-year low of R8,71 set in June if the euro region continues to look shaky and fuel investor risk aversion.
At 8.30am local time the rand was bid at R8,5278 to the dollar from Tuesday’s close of R8,5103 and Monday’s close of R8,4516. It was bid at R10,2835 to the euro from its previous close of R10,2646 and at R13,2129 against sterling from R13,1933 before.
Analysts say the rand is likely to fall towards R8,71, a three-year low hit in early June. It hit a seven-week low of 8.5525 on Tuesday.
The euro was bid at $1,2067 from Tuesday’s close of $1,2064 and Monday’s close of $1,2120.
Absa Capital said in its morning report that, predominantly as a result of European events, the rand weakened on Tuesday from a close of R8,45 per dollar the on Monday to R8,52 per dollar last night.
"Risk averseness was driven by the news that in its visit to Greece, the ‘troika’ (of the European Union, International Monetary Fund and European Central Bank) found the country to be off target in meeting its terms for the bail-out, while Spain’s 10-year yields jumped to above 7.5%. In addition, the outlook of Germany’s credit rating was lowered by Moody’s Investor Services.
"The flash manufacturing PMI (purchasing managers’ index) out of Europe also failed to surprise, remaining at the subdued level of 46,4 in July," the bank said.
"With no data released locally today, the rand will take its cue from international data, with second-quarter GDP figures for the UK. We are in line with consensus in expecting a contraction of 0,2% quarter on quarter."
Dow Jones Newswires reported that the euro remained steady against the dollar and yen during Asian trading on Wednesday, after hitting fresh multiyear lows on the previous day, as risk aversion persists amid concern about the situation in Europe and the threat of potential Japanese yen-selling intervention.
The euro remained near the $1,2070 level after hitting a fresh two-year low of $1,2042 on Tuesday.
Traders said the single currency struggled to rebound as speculation remained that Spain could still require a bail-out and on reports that Greece would likely require a further restructuring of its national debt.
"Attention will be paid to news on Greece’s debt restructuring," said Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ. Kamei said the euro’s weak trend would likely continue for the time being.
Kengo Suzuki, forex strategist at Mizuho Securities in Tokyo, said Spain’s benchmark 10-year bond yield, which remains at euro-era highs near 7,5%, as well as Italian bond auctions on Thursday would be watched to gauge risk sentiment.
Earlier on Wednesday, Japan posted a surprise ¥61,7bn trade surplus for June, its first surplus in four months as imports fell for the first time in 30 months. Economists had expected a ¥135bn deficit in June after three months of shortfalls.
Australia’s consumer price index rose 0,5% in the second quarter of 2012 from the first quarter and rose 1,2% from a year earlier.
Economists on average expected the CPI to rise 0,6% on the quarter and to increase 1,3% year on year. The Australian dollar dipped against the US dollar following the data, but quickly recovered.
