The rand was still trading below the R7 per dollar level in late afternoon trade on Monday, capitalising on the euro’s recovery against the dollar after a six-week worst level against the United States unit on Friday.
The rand frequently takes its cue from the euro, gaining or losing in tandem against the dollar, which rallied last week after surprisingly stronger-than-expected US employment.
At 16.55pm, the rand was trading at R6,9701 to the dollar from its New York close of R6,9114 on Friday, R7,0053 on Thursday and R6,9165 on Wednesday. It was last at R8,0035 to the euro from a New York close of R8,0046 and at R11,6653 against sterling from a previous R11,6496.
Having traded earlier Monday at $1,1530, the euro was last quoted at $1,1479 from $1,1507 late on Friday, $1,1416 late on Thursday, $1,1439 late on Wednesday and $1,1488 late on Tuesday, while gold was quoted at $383,40 an ounce from Friday’s close of $383,13 and Thursday’s close of $379,95.
“The rand has been stronger on the euro. It looks as if the euro wants to go stronger, so we could break below R6,90 per dollar,” said a currency trader.
“But we have also been some some good demand today for dollars up to the R6,98 level,” another dealer added.
Dow Jones Newswires reports that the dollar weakened sharply across the board on Friday, completely wiping out gains accrued earlier on the back of surprisingly strong US employment data as rumour-driven trade forced dealers to unwind hefty long dollar positions.
This position-squaring tripped several layers of stop-loss sell orders, which slammed the dollar down from session highs — six-week highs against the euro and Swiss franc — to near intraday lows at the close of New York trade.
The excuse given by traders for suddenly dumping dollars was a rumour — later denied by a government official — that the US would raise the nation’s terror alert status.
The rumour caught the market extremely long on dollars and once the US currency started to slide, these players were forced to cover their positions, which triggered several stop-loss sell orders.
Late on Friday in New York, the euro was at $1,1540, up well over a cent from the intraday and new six-week low of $1,1378 and well up from $1,1410 late on Thursday in New York.
Aside from the terror alert rumour, dealers attributed the euro’s turnaround to the solid support it received at the lows from Asian central bank bids, notably the tenacious defence of a large options-related barrier at $1,1375 from a large Asian central bank.
The dollar had regained some ground against European currencies on Monday following Friday’s selloff, but yen strength was the main driver of market activity.
The yen rose across the board following Japanese parliamentary elections over the weekend, in which Prime Minister Junichiro Koizumi’s ruling Liberal Democratic Party was able to maintain a slim majority by merging with a coalition party. — I-Net Bridge