Johannesburg The rand beat a hasty retreat as the recovering dollar knocked it weaker yesterday, with markets nervously awaiting the outcome of the central banks monetary policy committee meeting.
At 5pm the domestic unit was bid at R5.83 a dollar, about 7.6c weaker than its previous close in Johannesburg, after sliding as far as R5.90 at one point.
Dealers said the units abrupt turnabout after scaling a six-year peak against the greenback early this week mainly reflected global trends as the dollar rose sharply against the euro.
But they said markets were also wary ahead of the outcome of the last monetary policy committee meeting of 2004, with a televised announcement due at about 3.30pm today after a two-day meeting.
«If they keep rates steady, the rand will have a bit of a knee-jerk move stronger, but not massively,» a London-based trader said.
The trader said few people expected an interest rate reduction, «and if there is one you will see a big move it will go through R6 a dollar very quickly».
At 5pm the euro was bid at $1.3259 a dollar, compared with $1.3427 in New York late on Tuesday as investors took profits on other major currencies on signs that their central banks might scale back interest rate tightening.
Sharp falls in the price of gold and oil also helped put heavy pressure on commodity-linked currencies such as the Australian and New Zealand dollars, along with the rand, traders said.
Comments from central bank chief Tito Mboweni late on Tuesday left intact perceptions that the bank would leave its key repo rate steady, although some analysts said a move could not be ruled out.
«There is nothing in the speech that suggests there is not going to be a rate cut,» said Absa treasury economist Chris Hart.
«The full possibility of anything between no change and a 1 percentage point reduction may be discussed.»
Mboweni said he preferred a «competitive» exchange rate but repeated that the Reserve Bank did not target the rand, but inflation which has been at the lower end of its 3 to 6 percent target range for several months.
Domestic bonds were softer after initially gaining ground. The yield on the R194 weakened 6 basis points to 7.795 percent.
The yield on the benchmark R153 weakened 4.5basis points to 8.125 percent bid.
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