Rand recovers from weakest level

2012-05-11 13:40 Johannesburg - The rand recovered from today's weakest level in midday trade on Friday.

The earlier weakness had been prompted by investor concerns about Greece and its impact on the euro, which had resulted in many commodity currencies such as the rand and the Australian dollar being sold off.

"The support at R8.12 held, so investors have covered their short position as they do not want to be too exposed going into the weekend," a local trader said.

At 11:45 local time the rand was bid at R8.0752 to the dollar from a worst level on Friday of R8.1144, Thursday's close of R8.0236, Wednesday's close of R7.9993, Tuesday's close of R7.9010 and Monday's close of R7.7983. It was bid at R10.4513 to the euro from R10.3823 before, and at R13.0032 against sterling from R12.9482 previously. The rand was last above R13 a pound on December 16 2011.

The euro was bid at $1.2944 from Thursday's close of $1.2935, Wednesday's close of $1.2936 and Tuesday's close of $1.2992.

RMB said that certain markets look under pressure. US equities looked set for a tough day after JP Morgan stunned the market with a report of large trading losses. And EUR/US$ had dropped marginally but that was still enough to make fresh four-month lows. Both were negatives for the rand, but global markets were moving cautiously rather than collapsing. Encouragingly, for all the risk aversion evidenced this week, foreign investors haven't been selling out of SA.

Dow Jones Newswires reported that the euro edged down on Friday and was likely to keep falling due to investors' renewed concerns over the possibilities of a disorderly Greek default or the country's exit from the eurozone due to political uncertainties.

"It's Greece. It's its politics," said Takao Yahata, chief manager of currency trading at Mitsubishi UFJ Trust and Banking.

Athens' ruling coalition lost its majority in the May 6 election, and the market is paying attention to whether the nation will be forced to call another election as early as in June. The result of such an election, or avoiding one, could lead to a change in the nation's course to improve its fiscal status, a necessary condition to get aid from other eurozone countries and the International Monetary Fund.

Traders said the euro's losses so far were limited because some speculators were defending the currency options' barrier at $1.2900.

But with one more push, such as a negative headline from Greece, the euro was likely to resume sharper declines, Yahata said.