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25 May 2012
   
 
 
Article by: Sapa

The weakness of the rand is not due to the up-coming elections, Rand Merchant Bank (RMB) currency strategists said on Tuesday.

"We can't, in fact, see the result having much influence.

"An African National Congress (ANC) two-thirds majority might worry some, while a fall in the ANC's share from the last election's 69% would encourage some comments of improvement in multi-party democracy," RMB said in a statement.

However, the results would take a few days to be finalised and would in all likelihood be swamped by the effects from global markets, RMB added.

"Essentially, all markets are still trading one theme: the depth and extent of the global recession."

RMB anticipated that the rand against the US dollar would trade in a range of between 9,00 and 9,25 for Tuesday.

RMB said that after six straight weeks of gains the global market rally had run into serious problems.

"Monday saw sharp profit taking in US equities, sentiment soured by credit warnings from Bank of America, and cautious remarks from global policy makers."

It added that earnings results from US companies would continue to drive the market "but once again the Dow has failed to sustain past 8 000 and it looks as if the global market rally has faltered".

The rand was unwinding its gains and was back at 9,10 to the US dollar on Tuesday morning.

"This rand weakness, though, has lagged that of other currencies, which are trading back at the equivalent of 9,30 to 9,60, having already unwound over the past week as EUR/USD pushed lower to 1,2900.

"This obviously suggests some upside risks on USD/Rand," RMB noted.

"We may see some catch-up on further short covering but it looks more likely that the market will merely drift sideways to slightly higher given the limited event risk," RMB said.

 

 

Edited by: Sapa
 
 
 
 
 
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