The South African Rand is expected to trade in a narrow range for most of Thursday as traders act cautiously ahead of the European Central Banks latest policy meeting.
Since the start of the week the currency has traded within the R9.18 to R9.25 range and was 0.2% weaker at end of trade yesterday.
The Rand managed to steady itself against the US Dollar in yesterday’s trading session after a bout of disappointing economic data reinforced the nation’s gloomy economic outlook.
“South Africa is still plagued by a number of … risks, such as relatively weak economic growth and there are still no obvious catalysts for sustained rand short-covering,” Absa Capital said in a note.
“A firmer dollar environment, combined with softer commodity prices, has contributed to the latest bout of weakness, but the rand remains on the back foot in its own right.”
The European Union is South Africa’s biggest trading partner and whatever direction the single currency moves in the Rand tends to follow suit. The ECB is expected to keep the Eurozone’s interest rates on hold at the record low level of 0.75%.
The rand was unlikely to move significantly ahead of the meetings and the release of U.S. non-farm payrolls data on Friday, analysts said.
“Looking at the trading session, it is likely that the (USD/ZAR) pair continues to trade in fairly range bound fashion as the outcomes of the European central banks are awaited,” Tradition Analytics wrote in a note.
“Thereafter, the potential exists for the rand to extend its recovery although the momentum as reflected in the daily and the weekly charts are considered relatively weak.”
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