The rand is trading at R7,56 against the dollar in closing trade on Tuesday as traders track the euro for direction
The rand was softer against the dollar in late afternoon trade on Tuesday as it tracked a euro that had wilted just hours before the US Federal Open Market Committee was due to comment on the economy.
"The euro definitely hasn’t assisted the dollar rand but if you look at the rand against the crosses, it really hasn’t done too badly," a local currency trader said.
"We appear to have drifted into a bit of a risk-off situation and the dollar is looking resilient.
"The market is difficult to call as Spain appears to be the next problem child after Greece — so the problems will probably start all over again," the trader noted, adding that the market was waiting for the US Fed statement.
At 15:35 local time, the rand was bid at R7,5687/$ from its previous close of R7,5418/$. It was bid at R9,8867/€ from R9,9342/€ before, and at R11,8454/£ from R11,8056/£ previously.
The euro was bid at $1,3060 from its previous close of $1,3168.
Meanwhile Dow Jones Newswires reported that the euro had sagged in European hours on Tuesday as currency traders jumped on the dollar, pushing the greenback to an eleven-month high against the Japanese yen ahead of an update from the Federal Reserve on the US economy.
The dollar rose to as high as Y82.79 as investors bet on solid US retail sales data and as hopes grew that the country’s central bank would not have to unleash a third round of quantitative easing, so-called QE3, after a recent run of encouraging employment figures.
"Given recent upside US data surprises and market reaction to [Fed Chairman Ben] Bernanke’s house testimony, we think expectations of QE3 are already significantly lowered," said RBC Capital Markets in a note to clients.
The greenback’s gains, aided by a rise in two-year US Treasury note yields, were made despite a lack of further monetary policy easing action in Japan. The Bank of Japan overnight left its inflation aim and asset purchase programme unchanged, while extending a loan facility for key business sectors by ¥2-trillion.
The Japanese currency initially strengthened on the news but investor demand for dollars was stronger than the urge to buy the yen as the Asian session gave way to European trading.
Not even promising US retail sales data for February could brighten risk sentiment.
Sales at US retailers grew at the fastest pace in five months in February, as spending increased at auto dealerships, gas stations and clothing stores.
Retail and food service sales increased 1,1% from January to a seasonally adjusted $407,81bn, the Commerce Department reported Tuesday. Sales were up 6,5% year over year.
The sales increase was in line with the forecast from economists surveyed by Dow Jones Newswires.
Europe’s offering of economic data was encouraging but again largely failed to move currencies.
Germany’s ZEW economic sentiment indicator rose sharply to 22,3, compared with a consensus forecast of just 10.
"March’s rise in ZEW investor sentiment will add to hopes that the German economy is holding up surprisingly well as other parts of the euro zone slide back into recession," said research house Capital Economics.
