Rand under pressure, eyes on euro

Johannesburg - South Africa's rand firmed slightly against the dollar on Friday, with some dealers saying Thursday's sharp losses may have been overdone.

The rand will struggle to gain further given the market's nervousness about what European leaders will decide on the debt crisis when they wrap up their summit later today.

The rand fell sharply on Thursday to hit 8.2825 after the European Central Bank signalled it would not take aggressive moves to deal with the debt crisis, hurting investors' appetite for riskier assets.

“Finding some room for recovery will be difficult in this environment, even if moves are overdone,” said 4CAST in a note.

The rand was trading at 8.24 against the dollar, 0.36 percent firmer than Thursday's New York close of 8.27.

“Lack of solution at the EU summit may bring the November high into focus at 8.602. For now though 8.463 will be a stronger dollar/rand resistance,” 4CAST said.

The rand has been mainly driven by euro zone developments in the past few months and as a proxy for risk sentiment it has been extremely volatile.

David Gracey, a dealer at Investec, said the rand would be trading sideways ahead of the conclusion of the European leaders' summit and would maintain a weaker tone, with a possibility of breaking 8.30 in the next few days.

Government bonds started weaker on Friday.

Domestic stocks looked set for a lower start, with the JSE's Top-40 blue-chip December contract down 0.98 percent before the start of trade at 0700 GMT.

On fixed income, the yield on the 2015 bond was up 4.5 basis points to 6.775 and that on the 2026 issue increased by the same margin to 8.485 percent. - Reuters