The rand held steady during midday trade on Tuesday amid some consolidation following the previous day’s sell-off on euro area debt woes.
At 11:40 the rand was bid at R8.4584 to the dollar from its previous close of R8.4661. It was bid at R10.5658 to the euro from its previous close of R10.5833 and at R13.1981 against sterling from R13.1879 before. The euro was bid at US$1.2493 from its previous close of $1.2501.
“Europe is still uppermost in market players’ minds ahead of the European Union summit this week, although the ANC’s policy conference is being watched closely watched as well,” said Mike Keenan, sub-Saharan currency strategist at Absa Capital.
Fragile sentiment received another blow on Monday as ratings agency Moody's downgraded 28 Spanish banks due to the country’s rising sovereign risk and concerns over souring mortgage loans.
The outlook for the eurozone also appeared to darken slightly as German Chancellor Merkel hardened her opposition to common eurobonds ahead of a keenly awaited EU summit.
Standard Bank analysts said in a note: “With so much uncertainty still in the air, we maintain that risk assets will continue to suffer. The rand is particularly vulnerable this week as the ruling ANC party’s policy conference gets underway. With a host of contentious and potentially investor-unfriendly policies up for debate, including nationalisation and a desire for the state to play a greater role in the economy, the risk of further rand weakness in the current environment is heightened.” - I-Net Bridge