The rand was firm in Thursday morning trade ahead of the European Central Bank (ECB) meeting later in the day, which is expected to announce new measures to solve the euro crisis.
The local currency shrugged off unstable sentiments over the stalemate by European Union (EU) finance ministers to agree on capital requirements of banks on Wednesday, ahead of the much awaited meeting.
“The rand remains strong; there is a lot of off-shore interest. I don't think there will be much movement until the outcome of the ECB meeting later in the day,” said a local trader.
At 08:40 local time the rand was bid at R7.7283 to the dollar from its previous close of R7.7253. It was bid at R10.1487 to the euro from R10.1547 before, and at R12.4986 against sterling from R12.5073 previously.
The euro was bid at US$1.3139 from its previous close of $1.3155.
RMB in their morning report said that Tuesday's good data turned into Wednesday's bad data, with uncertainty as to where the global economy is going.
“The fact that the rand is holding up in this environment is a complete surprise: everything suggests it should be closer to 7.90 than 7.75,” RMB said.
The bank said all eyes today would be on the ECB.
“Given the Eurozone recession, they must surely ease policy. It is too early to expect action today but they should at least signal that they are thinking of moving in future. The US non-manufacturing survey data will be released later in the afternoon,” said the bank.
Dow Jones Newswires reported that the US dollar edged higher against the euro and the Australian dollar in Asia on Thursday, as investors trimmed risky positions ahead of a European Central Bank decision and key US employment data. While the dollar was slightly favoured, major currencies were mostly range-bound in quiet trade, with Japanese markets closed for the Golden Week holiday.
“The market may be positioning itself to be long on the dollar ahead of the event risk late in the week,” said Barclays Asia strategist Nick Verdi. He noted specifically the ECB rate decision at 13:45 SA time, the US non-farm payrolls data on Friday and the French presidential election run-off on Sunday.
Nothing dramatic is expected from the ECB, as it is widely predicted to keep rates steady. But if ECB President Mario Draghi “expresses a pessimistic outlook on the European economy, which could open up more downside for the euro/dollar cross,” Verdi said. - I-Net Bridge