The rand was softer on Friday morning, trading just below the 8.00 per dollar level as risk aversion and volatility returned after a couple of days of more stable conditions.
At 8.45am local time, the rand was trading at R7.9892/$ from its previous close of R7.9770/$. It was trading at R10.7965/€ from R10.8430/€ before, and at R12.4385/£ from R12.4457/£ previously. The euro was at $1.3510 from $1.3580 before.
Standard Bank analysts said in their morning report that increased global risk aversion and market volatility are a function of the deteriorating global growth outlook and the global sovereign debt crisis.
"On the one hand, rating agencies Fitch and Standard and Poor's downgraded New Zealand's credit rating this morning. On the other hand, disappointing household spending data out of the US and Germany yesterday, combined with dismal manufacturing data out of China this morning, has inflamed fears about a global recession. This has seen Asian equity markets and commodity prices fall this morning," they said.
They noted that if SA's trade balance, due at 14:00, indicates a further deterioration of the domestic current account and balance of payments, the rand could weaken further today.
"However, the currency is mostly taking direction from global sentiment. While we still see R8.00 as a tough psychological hurdle for rand bears, we maintain that the rand will weaken to R8.20 in the short term."
RMB analysts noted that the rand has been relatively stable now for three days, trading 7.78-8.00.
"Overnight USD gains have seen us trading to the top end, tracking other risky currencies that have maintained a negative bias despite other risky assets - notably equities - performing very well. This is indicative of the continued stress in the system."
They added that gauging daily moves is little more than guessing at this stage but the market seems happy around 8.00 for now. Event risk comes mainly with this afternoon's US personal and income spending figures although markets are being driven by political noises rather than economic data.
Dow Jones Newswires reported that the dollar fell against the yen in Asia Friday due to Japanese exporter selling related to their fiscal half-year end while the euro took a hit from New Zealand's credit downgrade by major rating companies.
Mitsubishi UFJ Trust and Banking's senior dealer Toshihiko Sakai said that's because investors were reluctant to buy the euro, which is yielding higher but also riskier than its U.S. and Japanese counterparts.
"The most notable move in Asian currency market Friday was the euro, which might have resumed falling," Sakai said.
He said the euro could be supported throughout this global day as funds may adjust their portfolios before finalising their benchmark rates today. But in the longer-term, the euro remains fragile as debt problems haven't improved, he added.
