THE rand was softer yesterday morning due to a dollar rally spurred by the expectation that the United States Federal Reserve may raise interest rates sooner than expected.
At 8:49am‚ the rand was at R10,8186 against the dollar from a close of R10,8079 on Monday.
Against the euro‚ the rand was at R13,9469 from a close of R13,9348 the previous day and was at R17,4015 against the pound from R17,3940 on Monday.
Rand Merchant Bank said in a morning note that the dollar rally was driving the dollar-rand rate higher rather than the euro-rand and the crosses lower.
“Add some concern about today’s current account figure and dollar-rand has pushed into the low R10,80s.
“The market has failed in the R10,80 to R10,88 area six times in the past four months so resistance will be steep but, for the first time in weeks, there is a real risk of a break of the range to the topside,” RMB said.
The local second quarter 2014 current account figure will be out at 10am as part of the data contained in the South African Reserve Bank’s quarterly bulletin.
“Consensus expectations are for a deficit of 5,5% of gross domestic product (GDP), up from the 4,5% in the first quarter of 2014.
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“We are a little more optimistic than consensus, expecting 5,3%. The response should be straightforward: The lower the deficit, the better for the rand,” RMB said.
The release of the quarterly bulletin would be the highlight of the day and any positive surprises should support the local currency, which appeared to have come under pressure due to the expectation of a negative outcome of the current account balance, RMB said.
“The dollar is rallying hard. Yesterday saw euro-dollar break through $1,2900 to trade at $1,2870 this morning.
“The renewed gains reflect ongoing confidence in the US economic recovery, the market shrugging off Friday’s weak data, as well as a US Federal Reserve paper that suggested the market is being too dovish in pricing Fed hikes,” the bank said.
-BDLive
