Rand narrowly avoids hitting R14 to the dollar as the euro firms

The rand was steady on Thursday afternoon as the euro regained lost ground against the dollar. It rebounded to R13.7637 to the dollar during the day after weakening to R13.998 in morning trade.

The market, for the moment, appears to be looking past global trade concern, which has benefited the dollar, to this week’s EU summit. The euro gained on positive sentiment ahead of the summit, despite myriad challenges, with the pound falling to a two-month low amid criticism that UK Prime Minister Theresa May had no meaningful Brexit plan to present to EU leaders.

“The summit is likely to focus on the issue of immigration, with the new populist Italian government adopting a tough stance on the subject,” said Oanda analyst Craig Erlam, adding that, given their differences, it was hard to see the countries coming to an agreement on the issue, which could lead to further political instability in the block.

Focus could remain on German chancellor Angela Merkel’s stance amid her ongoing struggle to retain political power with strong criticism expressed by her coalition partners on EU immigration policies.

A stronger euro is generally supportive of the rand, but analysts warned that any bouts of strength in the euro were likely to be short-lived. “What we are seeing in the forex market is a very broad-based dollar rally,” said FXTM analyst Jameel Ahmad. This meant that the advancement in the dollar was the main catalyst behind emerging-market weakness.

At 3pm, the rand was at R13.8551 to the dollar from R13.8569. R16.0281 to the euro from R16.0149, and R18.0894 to the pound from R18.1756. The euro was at $1.1567 from $1.1554, and the pound at $1.3058 from $1.3116.

Local bonds remained weaker despite the rand’s recovery, with the R186 bid at 8.93% from 8.89% and the R207 at 7.62% from 7.6%. The benchmark US 10-year treasury was little changed at 2.8268%.