The rand was firmer against the dollar in late afternoon trade on Friday after the release of lower-than-expected US February CPI data that was viewed as positive for risk currencies.
“It's been a lacklustre and quiet session so far and the week has been the same,” a local currency trader said.
“I'm a bit sceptical about the response to the US CPI data because of the price of gold.
“I can definitely say that the market is not trading on fundamentals but rather from headline to headline.”
At 15:40 local time, the rand was bid at R7.5869 to the dollar from its previous close of R7.6020. It was bid at R9.9705 to the euro from R9.9403 before, and at R12.0174 against sterling from R11.9358 previously.
The euro was bid at US$1.3148 from its previous close of US$1.3076.
Meanwhile Dow Jones Newswires reported that the dollar fell against the euro and the yen in European trading on Friday after US inflation data, while currency traders paused for breath after a week of sharp gains in US Treasury yields and shares.
US Treasury yields held near five-month highs as investors continued to adjust their expectations for future US interest rates after a run of solid US economic data, with US futures pointing to further share gains on Wall Street after the S&P 500 index on Thursday briefly popped above 1,400 for the first time since June 2008.
European bourses were also marginally higher in late-morning European trade.
In the absence of fresh European economic data, traders had held back from placing large currency bets, but were content to continue supporting the dollar.
“The end of another long week and a risk of profit-taking is out there, but while US yields retain this bid tone, the dollar is likely to retain a firm footing overall,” said a London-based trader.
Currency strategists say there appeared to have been a structural shift in the foreign exchange market's dynamics this week, now that the potential for an immediate disorderly Greek default had been averted, following the agreement of a new bailout for the indebted country.
Unlike with previous dollar rallies, when the greenback tended to benefit from a flight to safety as the eurozone crisis cranked up a notch, “the dollar is gaining in March in a good news environment, benefiting from stronger US data and higher Treasury yields,” currency strategists at Credit Suisse said in a note to clients.
Currency traders, even so, were wary of chasing the dollar much higher.
“It's quite hard for people to run with continuously good US data. It's not very clear cut how long it [data] will stay positive,” said Ankita Dudani, a currency strategist at Royal Bank of Scotland. - I-Net Bridge
