The rand was still trading listless effecting rand volatility, as the market tries to find some concrete evidence of what direction to take, following a rally on Monday after news of the Spanish $125bn banking bailout. The ZAR moved in a quiet range on the day from a 25c to 35c range. Markets are just see-sawing after it digested the Spanish banks bailout news yesterday and will keep on treading water until this weekend’s Greek elections. No major international money flows into South African markets and hedge funds have been seen recently. A lot more volatility in the rand is expected going forward due to the nervousness caused by the uncertainty over the upcoming Greek June 17 elections which could result in an anti-bailout government taking charge‚ and the country leaving the EC‚ which would cause ripple effect.
[box]Markets are just see-sawing after it digested the Spanish banks bailout news[/box]
Risk Volatility still wreaking havoc in EC markets/ Germany concerns
Germany as the main EC member in the bailout deals is surely not too concerned at the developments at present. The Euro is helping their economy as their exports become very competitive with such a weak Euro. So if Greece does bail the Euro would weaken dramatically and their exports would get even better(Devil’s Advocate)not so sure it’s as easy as that but worth food for thought. I am of the opinion that even if Greece did bail the price has been discounted in the rate and we would see an improvement of the Euro and ultimately the emerging markets would react accordingly.
Market trend very much range bound yesterday and the rand failed to clear the 8.48 level. We open this morning just below 8.40 as the rand is starting to feel a bit top heavy after yesterday’s failure to move higher and surely some profit taking and exporters must have been in the market. Market Strategy is to look to sell dollars around 8.44/45 and for us to try the lower end of the range.
Risk on, risk off or just range bound. Volatility is the only ‘good word’ for some time to come. Market lacks conviction. Price action this morning has not been much to talk about. Currencies have moved into a narrow 20-30 pips range and equities have been moving between small gains and losses. EUR moved higher overnight and equities in the US closed in positive.
There were various theories doing round to the reasons behind it. ECB Vice President Vitor Constancio supported the cause of Bank Union. Even though he clearly said that it is still not around the corner soon. Market nevertheless cheered the headline. There were talks of short squeeze driving the EUR market and also talks of a large street buyer. Some said that it was just a case of traders trying to make some money after the beating they took on Monday afternoon by doing bottom hunting.Whatever the case maybe, the end result was small gains in EUR and other risk currencies. Our traders in Singapore prefer playing EUR from the long side today but also caution about keeping the strategy flexible. Order sheet looks neutral for the day with a small skew to the downside. Supports come at 1.2480 and 1.2440. Resistance come at 1.2525 and 1.2560.