Rand strengthens from oversold levels as dollar weakens
The rand was firmer against the dollar and pound on Friday morning, but flat against the euro, as markets digested weak US data that suggested the local currency may be slightly oversold.
A US gauge of business confidence in June posted its largest monthly fall in four years on Thursday, with the resulting dollar weakness assisting a euro recovery, even as that currency comes under pressure from Italian politics.
The rand, which usually tracks the euro, has been under pressure this week due to constrained global liquidity and weak local data.
The local currency, however, had potential for a short-term technical correction to the downside, said Nedbank Corporate and Investment Banking analysts.
The euro has slipped significantly over the past two months against the dollar, as the market priced in a relatively faster pace of monetary policy tightening in the US than in the eurozone.
Sterling has found support from a Bank of England’s (BoE’s) monetary policy decision on Thursday, with the commentary from the bank raising the expectation of an interest rate increase for the UK in August.
Global trade war fears continue to hover over international markets, while an election in Turkey at the weekend could spoil investor appetite towards emerging markets in general, analysts said.
Local focus remains on wage negotiations at Eskom due to the possible economic effects of load shedding and further risks to the government’s financial position.
Local bonds were slightly better bid in the morning, with the benchmark R186 yielding 8.9% from 8.92% on Thursday, while the R207 was at 7.55% from 7.59%.
At 9.25am, the rand was at R13.5388 to the dollar from R13.5834, R15.7826 to the euro from R15.7625, and R18.0032 to the pound from R17.992. The euro was at $1.1657 from $1.1604.