The South African rand was steady against major currencies in early trade on Tuesday after rallying over 20 cents against the dollar on Monday when the market was caught long on dollars. Currency traders expect the rand to stabilise somewhat on Tuesday, but add that the rand’s firming trend remained intact.
At 08h41, the rand was quoted at 6,3096 to the dollar from a New York close of 6,3076 on Monday and 6,5451 on Friday. It was quoted at 8,0002 to the euro from Monday’s 7,9819 and Friday’s 8,2265 and at 11,4189 against sterling from a previous 11,3844.
The euro was quoted at $1,2693 from $1,2676 late on Monday in New York and $1,2585 late on Friday, while gold was quoted at $422,75/oz from a previous $423,20/oz.
“The rand should stabilise a bit today — if anything does happen, it should still strengthen,” a currency trader said.
He continued that the rand had rallied on Monday after the market was caught long dollars from Friday. Overseas players had taken advantage of the situation and sold more dollars into the market, adding impetus to the move.
“The market isn’t as long as it was. Late yesterday, we saw a big importer at 6,30-6,31 and today we might see a bit of demand at first, but the rand is still in a strengthening trend at the moment.”
The trader expected the rand to trade in a 6,25 6,35 per dollar range for the rest of the day.
Dow Jones Newswires reports that the dollar tumbled across the board on Monday as the first full week of 2004 got underway, setting a fresh all-time low against the euro, and hitting a three-year low against the yen despite apparent intervention.
The negative tone was set over the weekend, when Federal Reserve Governor Ben Bernanke said the chances of a dollar crisis are “quite low” and that interest rates will likely be held down for some time.
With US interest rates at 45-year lows, bond markets are finding it increasingly difficult to attract enough foreign investment to finance the massive US current account deficits and keep the dollar from falling.
Bernanke’s comments gave “traders the green light to keep selling the dollar,” said Omer Esiner, market analyst at Ruesch International in Washington.
“(Bernanke) reiterated the market’s outlook, not only for steady interest rates out of the US, but also the fact that US officials are more amenable to an orderly dollar decline.”
The dollar held its ground against the yen in Asia Tuesday after falling sharply overnight, as Japan followed Monday’s apparent yen- selling intervention with fresh warnings over the dollar’s decline. – I-Net Bridge