Rand firms as hopes for Greek bailout rise

The rand firmed against the dollar in noon trade on Friday as it tracked a euro that had been boosted by hopes that Greece's second bailout would get the go-ahead at the eurozone finance ministers' meeting on Monday.

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Rand steady as euro treads water

"Given another light day in terms of data flow, the fixation with the on-going Greek talks is likely to continue," a local analyst said.

At 11:43 local time, the rand was bid at R7.7428 to the dollar from its previous close of R7.7653. It was bid at R10.1825 to the euro from R10.1947 before, and at R12.2626 against sterling from R12.2654 previously.

The euro was bid at US$1.3161 from its previous close of US$1.3127.

RMB said in a note on Friday morning that for the rand, two-way risks were now evident.

Arguing for the downside, RMB added that the rand had lagged the recovery compared to its compatriot currencies while further gains in US equities would result in the Dow breaking 13,000 and the S&P500 the 1,360 level. Both were key psychological and technical levels.

The main threat to the topside remained the growing stress in Europe "and the ability of the Greeks to break the charity plate".

However, the markets were more positive today about Greece, RMB added.

"It now seems we may have a deal on Monday but of course, by later this afternoon it could all be off again."

Meanwhile Dow Jones Newswires reported that investors in Europe had welcomed signs that Greece was edging closer to securing a second bailout.

At a briefing on Thursday, Greek government spokesman Pantelis Kapsis said Greece expected eurozone finance ministers to approve the EUR130 billion bailout on Monday.

German sources said on Thursday that the plan to delay the overall deal to Greece by providing the country with a bridging loan to repay the March 12 bond redemption had been dropped.

At the same time, investors welcomed news that the European Central Bank planned to swap its Greek debt holdings for new bonds once debt-restructuring negotiations were complete.

As well as the developments in Greece, sentiment got a boost from encouraging US data released on Thursday. Initial jobless claims figures for last week beat expectations, falling to the lowest level in nearly four years. Meanwhile, the Philadelphia Fed index for February came in better than expected, as did January housing starts figures.

Despite the gains, market participants warned that challenges lay ahead.

"It pays not to get too carried away given we've seen so many false dawns over the past few months," said Michael Hewson at CMC Markets.

"As with all things to do with Europe, significant obstacles still remain with tough conditions to be laid down in exchange for the aid, which could see Greece baulk at the fiscal oversight demanded," he added.