THE rand was strong against major currencies today morning on the back of a firmer euro and a higher gold price. The rand was bid at R7,4515 to the dollar from R7,4590 at its previous close. It was bid at R11,0010 to the euro from its previous close of R10,9218 and was at R11,9513 against sterling from R11,8637. The euro was bid at $1,4724 from $1.4648 overnight. "Gold was part of the reason for the rand strength," one trader said.
"We will look for support at around 7.45, and lower than that it will be 7.35," he said. "The euro is stronger against other currencies and the gold price is also up, those are the reasons for the rand strength," another trader said. RMB analyst John Cairns and Nema Ramkhelawan said the US manufacturing sector was starting growing again in June. They said data yesterday showed that the giant US services sector started growing in September.
"While expected, this has been enough to change the tone in the global
markets - after four days of losses risky assets rallied nicely overnight. We also have a bizarre story from the UK Independent newspaper saying that Gulf states are talking with Europeans and the Chinese in order to denote oil sales
in a combination of currencies and gold rather than USD. "Lets get this straight; a South African oil importer would now have to buy gold, EUR, JPY, gulf currencies and Chinese Yuan (which as a start you can't) in order to pay for oil? It's a non-starter but the sentiment towards the dollar is such that the news has caused a ripple in global markets, sending EUR/USD to 1.47 and gold higher towards US$1,020/oz," they said.
Cairns and Ramkhelawan said the USD/ZAR was consequently back at R7,45 this morning, a dramatic reversal from R7,78 seen at one stage on Friday. The analysts said the New Zealand dollar (NZD), Brazilian real (BRL) and Hungarian forint (HUF) have all made new levels against the USD. The Australian dollar (AUD) isn't far behind, spurred by the first rate hike in the global cycle. "For the ZAR rally really to be back on though we would need to see strong support at 7.37/40 and then at 7.30 broken.
"SARB buying should be feared at both levels. It's going to be tough going and bizarre newspaper reports aside there is nothing in the way of news or data today that should affect. 7.40 — 7.52 range for today," they said. "Risks come mainly from EUR/USD and the possibility of gold breaking past its all time high of US$1,023/oz," noted the analysts.
Dow Jones Newswires reports that the euro and UK pound are higher on Tuesday against the dollar, but they may see some profit taking later on their intraday gains. Meanwhile all three are slightly lower against the yen. Jack Spitz, managing director of foreign exchange at National Bank in Toronto, said that with the G7's disregard of dollar weakness, "the market has reverted back to the standard risk-related and monetary policy motivators which for the moment at least are skewed in favour of marginal yet consistent" pressure against the greenback.
