Johannesburg The rand erased some of its earlier losses yesterday after the dollar tested a record low against the euro.
Bonds were little changed, with players awaiting todays release of inflation data. The rand eased to R6.0320 but then regained ground as the dollar fell. By 5pm it was bid at R5.9513 against the dollar, almost 4c weaker on the day.
«On the rand, the market seems reasonably happy with these levels,» said a trader. «The next big event is likely to be the monetary policy committee meeting in December, but I think well break out of the range before that.»
Todays release of October consumer inflation data was not expected to significantly move the currency but could move the bond market, traders said.
A Reuters poll last week forecast the targeted CPIX inflation rate rising by an annual 4.1 percent in October, quickening from 3.7 percent in each of the previous two months.
But that increase will be attributed mainly to a higher oil price during October.The market is already pricing in a 50 basis point interest rate cut at the central banks December 8 and 9 policy meeting.
«The bond market is pretty static,» said a trader."With the rate cut priced in, I dont think well see too much change unless we get a surprise in the consumer price index or the producer price index."
The yield on the benchmark R153 weakened 1 basis point to 8.36 percent. The yield on the R194 bond was flat at 7.9 percent.
In London, the euro rose above $1.31 for the first time as the dollar continued its retreat on concerns about imbalances in the US economy. The euro rose as high as $1.3102 in late London trade after trading at $1.3045 late the previous day.
The dollar was slightly weaker at ´102.91.
HBOS currency analyst Steve Pearson said the dollars decline was part of a well-established downward trend for the US unit. He has a target for the euro of $1.35, «probably in the first quarter of next year».
The dollar came under pressure following comments from Federal Reserve chairman Alan Greenspan on Friday suggesting that a further depreciation might be necessary to bring down the US current account deficit.
In addition, Russias central bank revived speculation it might boost the euro component of its foreign exchange reserves.
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