The volatile rand was marginally firmer in afternoon trade after Greek fears were allayed.

The volatile rand was marginally firmer in afternoon trade after Greek fears were allayed as a result of a pledge made by the European Central Bank to support the country ahead of the new June poll.

The discussions over the formation of a Greek government broke down after only nine days and the consequent risk-off sentiment weighed heavily on the rand and emerging market currencies, until the ECB rescue announcement.

“The rand strengthened on news that the ECB will support Greece. It remains vulnerable, but some of the fears have been allayed ahead of the June 17 elections in that country,” a local trader said.

At 15:30 local time the rand was bid at R8.3090 to the dollar from Tuesday's close of 8.3275 and Monday's close of R8.1983. Just a week ago the rand was below R8 per dollar. It was bid at R10.5841 to the euro from R10.5955 before, and at R13.2483 against sterling from R13.3041 previously.

The euro was bid at US$1.2738 from Tuesday's close of $1.2732 and Monday's close of $1.2828.

Dow Jones Newswires reported the European Central Bank wanted Greece to remain in the euro zone, while the decision for Greece's possible exit from the currency union was not an issue that the ECB would need to decide on, according to ECB President Mario Draghi on Wednesday.

“While the ECB will continue to comply with the mandate of keeping price stability over the medium term in line with treaty provisions and preserving the integrity of our balance sheet, I want to state that our strong preference is that Greece will continue to stay in the euro area,” Draghi said at a conference in honour of executive board member Jose Gonzalez-Paramo, whose eight-year term will expire at the end of May.

As recent parliamentary elections have been inconclusive in Greece, worries have been mounting that it may leave the euro zone. “Since the treaty doesn't foresee anything on exit, this is not a matter for the ECB to decide,” Draghi said. - I-Net Bridge

The Indian rupee slumped to a record low against the dollar.

The Indian rupee slumped to a record low against the dollar on Wednesday as the global risk aversion added pressure on a currency already under fire from the country's current account and fiscal deficits.

The rupee, the worst performing emerging market currency in Asia since March 1, is facing further losses as India struggles with a slew of additional economic challenges, including sliding growth.

Investors are also showing little faith in the government's ability to meet its fiscal targets and solve its economic challenges, critical stumbling blocks for a country that needs the capital to shore up its twin deficits.

Finance Minister Pranab Mukherjee pledged on Wednesday to take action to boost “fiscal consolidation”, but said no measures had been worked out, reinforcing these market concerns.

The worries about India's outlook are overwhelming the Reserve Bank of India's ability to defend the local currency, despite repeated interventions and a rash of other measures targeting deposits and exporters.

“It is very hard for the central bank to turn the currency around,” said Robert Prior-Wandesforde, an economist for Credit Suisse in Singapore.

“Without doubt, the investors are looking for steps from the government in terms of structural reforms, be it in the form of news on goods and services tax or the direct tax code or some measures that might encourage infrastructure investments.”

The rupee fell to a record low of 54.52 to the dollar, well below its previous record low of 54.30 hit in December.

Analysts expect the rupee, which ended trade at 54.51, to remain under pressure, given the continued concerns that Greece may pull out of the euro zone and the challenges at home.

A Reuters poll on Tuesday showed analysts expect the rupee to hover near record lows against the dollar for the next month or so, despite already falling nearly 10 percent since its 2012 peak in February.

“Unfortunately for the rupee, this is not a great environment to run a current account deficit and thus be reliant on capital inflows from foreign lenders,” said Sean Callow, a senior currency strategist at Westpac Banking Corp in Sydney.

“I suspect only radical steps by RBI - or sudden action by foreign central banks and/or G20 - will stop a push through 55 and quite possible higher,” he said, referring to the dollar/rupee exchange rate.

ANALYSTS BLAME THE BUDGET

Many analysts blame the start of the rupee's fall on the federal budget for fiscal 2013 unveiled in mid-March, which proposed a deficit target of 5.1 percent of gross domestic product that generated market skepticism.

The government also included a controversial set of taxation proposals for foreign investors.

Capital flows into Indian debt and equities turned negative in April, with a net $926.8 million leaving the country, down from a peak of $7.2 billion in net purchases in February.

Mukherjee's promise of austerity measures on Wednesday failed to convince investors, especially as policy making is expected to stall in the run-up to general elections in 2014.

“The government has been only talking about fiscal consolidation but there are no steps at all, nothing being done to reduce the fiscal deficit,” said Rupa Rege Nitsure, chief economist at Bank of Baroda.

The RBI thus faces a steep battle in defending the currency, even as a weaker rupee threatens to push up inflation, though traders say they do not rule out more aggressive actions.

“The RBI is aware of the situation. We have taken steps and will take further steps if necessary,” said RBI deputy governor H.R. Khan at the sidelines of a summit of South Asian Association for Regional Cooperation in Nepal.

Liquidity would be a concern, though the central bank is expected to step up bond purchases via open market operations should it sell dollars more aggressively in markets. - Reuters

The volatile rand was slightly firmer in midday trade following news that the European Central Bank will support the troubled Greek nation for the next six months.

The volatile rand was slightly firmer in midday trade following news that the European Central Bank will support the troubled Greek nation for the next six months.

The local currency kicked-off weaker in early trade as the growing prospect of a Greek exit from the eurozone sent investors scurrying out of the 17-member currency.

"The rand is slightly stronger than this morning on news that the ECB will support Greece. The market remains volatile, however, and is looking for direction," a local trader said.

At 11:33 local time the rand was bid at R8.3488 to the dollar from Tuesday's close of 8.3275 and Monday's close of R8.1983. Just a week ago the rand was below R8 per dollar. It was bid at R10.6064 to the euro from R10.5955 before, and at R13.2669 against sterling from R13.3041 previously.

The euro was bid at US$1.2716 from Tuesday's close of $1.2732 and Monday's close of $1.2828.

Standard Bank said the rout on global markets continued after news that Greece was headed back to the polls.

"Wrangling over the formation of a new government in that country broke down after nine days. Risk-off sentiment weighed heavily on the rand and emerging market currencies, with the euro also posting losses," the bank said.

The bank said that elevated concerns of a possible Greek exit from the eurozone were likely to keep the market on edge, with the rand and other risky assets to remain under pressure.

Standard bank added that the latest retail sales numbers were expected at 13:00 local time and if they came out positive, it may have a positive effect on the local currency.

Dow Jones Newswires reported that the euro started to fall again in the afternoon after stabilising in the morning, with the single currency down 0.2% at 1.2703. The dollar also climbed against the yen, up 0.3% to 80.39. Worries that a Greek exit may hurt other members of the eurozone, and fears of easing demand from China pushed down commodities, contributing to a steep decline in Australia's largest mining companies. Oil dropped to a six-month low, falling 2.2% to $91.97 a barrel after a report showed that US crude supplies increased more than expected last week. - I-Net Bridge

The rand extended losses to hit the year's weakest level against the dollar on Tuesday as risk sentiment soured further.

Johannesburg - South Africa's rand extended losses to hit the year's weakest level against the dollar on Tuesday as risk sentiment soured further, though bonds held steady on support from good German growth numbers and a better than expected domestic auction.

News that Greece will hold new elections after leaders failed to form a coalition government focused attention on the possibility it might leave the euro, driving investors to dump risk for traditionally safe assets such as the dollar.

The rand was down 1.0 percent on the dollar at 8.2990 at 15h19 GMT, its weakest level this year and off a 8.2175 close in New York on Monday.

The rand broke through 8.24 support once the euro plunged below $1.28, and may head to 8.31 in the next session. Analysts say that even though the rand is over-stretched, exporters could be holding out for 8.50.

But the rand is likely to correct from over-sold levels before trying for 8.50, they added.

Gold prices were at four-month lows, supporting rand bears.

Government bonds were holding steady despite the rand sell-off on what dealers said was local demand for the highly liquid 2015 and 2026 benchmarks.

Yields were at 6.50 percent on the 2015 and 8.405 percent on the 2026, compared with an 11 basis point spike on the 2026 in the previous session.

“We were trading comfortably between 6.49 percent and 6.47 percent on the R157 for most of the session and it was also boosted by the better than anticipated weekly government bond auction,” said Richard Farber, a bond trader at World Wide Capital Securities in Johannesburg.

Dealers said the weekly government debt sale came early enough that risk sentiment was still supported by good German growth numbers in the morning.

The Treasury received higher demand for the 2026 and 2018 bonds at an auction earlier in the session than at previous sales of the bonds.

“The bond markets behaved well in light of the rand weakness. I think there has been local institution demand on the R157 and R186,” said another dealer in Johannesburg. - Reuters

The euro was stable after dipping overnight amid fears over a political stalemate in Greece.

The euro was stable in Asian trade Tuesday after dipping overnight amid fears over a political stalemate in Greece and a ratings downgrade for two dozen Italian banks.

In Tokyo, the single currency stood at $1.2834 and 102.57 yen, slightly up from $1.2823 and 102.37 yen in New York Monday.

The dollar was at 79.93 yen, up slightly from 79.84 in New York.

“We expect the dollar against the yen to continue rising firmly within the 79.00-81.00 range,” Masafumi Yamamoto, chief forex strategist at Barclays Capital in Tokyo, told Dow Jones Newswires.

Dollar-yen trade has been moving in a narrow range, as traders increasingly view the pair as safe-haven currencies amid turmoil in Europe.

A continued stalemate in Greece over forming a new government has elevated worries over whether the nation will keep up with its massive bail-out programme or withdraw from the eurozone.

Greek President Carolos Papoulias has been holding last-ditch talks with party leaders, seeking to forge an emergency government and avoid the need for fresh elections next month.

A rise in Spanish bond yields and Moody's downgrading of the credit ratings on 26 Italian banks added to worries about Europe's fiscal woes.

Christopher Vecchio, currency analyst at DailyFX, said more delays in forming a Greek coalition government would weigh heavily on risk appetite.

“For the immediate future, we continue to look for the 1.2626 yearly low in the euro against the dollar, and a slew of weak growth data this week could accelerate the move lower,” he told Dow Jones Newswires.

Eurozone gross domestic product figures are due to be released Tuesday, with the data expected to confirm the region is mired in a recession, while a slip in European Union industrial output in March also soured sentiment. - Sapa-AFP

The rand was firmer in midday trade, tracking the euro as it made a slight recovery, despite continued European uncertainties.

The rand was firmer in midday trade, tracking the euro as it made a slight recovery, despite continued European uncertainties.

“It has been quiet, trading in ranges. The euro has had a minor recovery, we are euro dependent at the moment,” a local trader said.

At 11:34 local time the rand was bid at R8.1772 to the dollar from Monday's close of R8.1983. It was bid at R10.4983 to the euro from R10.5146 before, and at R13.1302 against sterling from R13.1855 previously. Prior to Friday, the rand was last above R13 per sterling on December 16 2011.

The euro was bid at US$1.2850 from Monday's close of $1.2828.

Standard Bank said the twin concerns of a Greek exit from the eurozone and a landing harder than expected in China were keeping the market on edge.

“Concerns that Greece will exit the eurozone are continuing to mount as political parties appear unable to reach an agreement on a new government,” said the bank.

Dow Jones Newswires reported that the euro climbed 0.3% against the dollar to $1.2868, climbing from a four-month low reached late on Monday.

In the morning, investors sold as the prolonged coalition talks in Greece, which failed to form a government on Monday and were extended to Tuesday, reignited fears of the Mediterranean country leaving the eurozone.

“Markets are aggressively pricing in a messy Greek default and a potential exit from the eurozone,” said Stan Shamu, market strategist, IG Markets.

Later in the day, traders received a boost, with Germany's gross domestic product rising 0.5% from the fourth quarter of last year, while France's economy managed to avoid a contraction. - I-Net Bridge

India's central bank likely intervened in foreign exchange markets after the rupee breached the key 54 level against the dollar, nearly hitting its lifetime low, dealers said.

India's central bank likely intervened in foreign exchange markets on Tuesday after the rupee breached the key 54 level against the dollar, nearly hitting its lifetime low, dealers said.

India's Reserve Bank of India (RBI) is suspected to have started selling dollars after the rupee hit an intraday low of 54.13

against the dollar in early trade, the lowest level since December 15, when it hit a record low of 54.3.

“We suspect that the RBI intervened in early trade today to aid the currency,” an analyst with a state-run bank said, declining to be named.

After the intervention, the rupee strengthened to 53.67 levels.

The currency has been hurt by escalating fears over eurozone debt crisis, flagging domestic indicators, slowing overseas funds inflows and pressure from oil importers, who must exchange rupees for dollars when they buy crude.

Energy-poor India imports four-fifths of its crude oil needs.

The unit was also weakened on Monday by data showing annual inflation unexpectedly accelerated in April to over seven percent, reducing chances of swift interest rate cuts to boost slowing economic growth.

Traders say the central bank appears to have intervened to sell dollars more than a dozen times this year in a bid to curb the Indian currency's fall.

The bank has a policy of not commenting on its actions in the forex market.

The rupee was Asia's worst performing currency in 2011, losing more than 20 percent of its value in the calendar year.

But after it hit a record low in mid-December, it rebounded to 48.67 rupees in February, led by strong foreign fund buying of Indian assets, before falling again. - Sapa-AFP

The rand was stronger in early trade as a bounce in the euro prompted some short-covering.

The rand was stronger in early trade on Tuesday as a bounce in the euro after Monday's sell-off prompted some short-covering. The euro was helped by higher than expected German economic growth.

“The $1.28 support level held overnight, so we have seen some short-covering and exporter demand,” a local trader said.

At 08:41 local time the rand was bid at R8.1749 to the dollar from Monday's close of R8.1983, Friday's close of R8.0965, Thursday's close of R8.0236 and Wednesday's close of R7.9993. It was bid at R10.4951 to the euro from R10.5146 before, and at R13.1534 against sterling from R13.1855 previously. Prior to Friday, the rand was last above R13 per sterling on December 16 2011.

The euro was bid at US$1.2846 from Monday's close of $1.2828, Friday's close of $1.2893 and Thursday's close of $1.2935.

RMB said global markets were flat but still very skittish this morning.

“The smallest thing could set off the run again, pushing the rand towards 8.30, but for now it looks as like it will open at slightly under 8.20, with vicious short-term swings. The euro dollar remains the main factor to watch - a break below $1.28 would send global markets spiralling. The rand's resistance is at 8.22 and the rand against the euro faces an even sterner test at 10.55,” the bank said.

Dow Jones Newswires reported that Germany's economy, the largest in Europe, grew far more than expected in the first quarter, driven by a surge in net exports, data released on Tuesday by the Federal Statistics Office, or Destatis, showed.

Germany's gross domestic product rose by 0.5% in the first quarter from the fourth quarter of last year, according to price, seasonally and calendar-adjusted figures, and was up 1.2% from the corresponding period last year in price- and calendar-adjusted terms, Destatis said.

The data were far stronger than expected by analysts surveyed by Dow Jones Newswires, who had forecast quarterly growth of just 0.1% and an annual expansion of 0.8%.

Net exports were the main driver of growth quarter-on-quarter, Destatis said. Domestic consumption also boosted the economy after declining slightly in the previous quarter, helping to partly offset a drop in investment, the statistics office added.

Destatis also confirmed its earlier estimate that Germany's GDP contracted by 0.2% on the quarter in the fourth quarter of 2011, but grew by 2.0% on the year. Destatis will provide a detailed breakdown of the data later this month.

For 2011 as a whole, Germany's economy grew by 3.1% in price- and calendar-adjusted terms, compared with growth of 3.6% in 2010. Germany's GDP expansion in 2010 was the strongest since the country's reunification. - I-Net Bridge

The rand was weaker in afternoon trade as tension between Germany and Greece raised the possibility of a breakup of the eurozone.

The rand was weaker in afternoon trade on Monday as tension between Germany and Greece raised the possibility of a breakup of the eurozone.

“The market is very jittery right now, so the flight is into safe havens such as the US dollar,” a local trader said.

At 16:00 local time the rand was bid at R8.1853 to the dollar from Friday's close of R8.0965, Thursday's close of R8.0236, Wednesday's close of R7.9993, and Tuesday's close of R7.9010. It was bid at R10.5097 to the euro from R10.4506 before, and at R13.1563 against sterling from R13.0244 previously. Prior to Friday, the rand was last above R13 per pound sterling on December 16 2011.

The euro was bid at US$1.2834 from Friday's close of $1.2893 and Thursday's close of $1.2935.

Dow Jones Newswires reported that the prospects for the US currency haven't looked so good for quite some time. The euro, which has spent many months largely ignoring the eurozone debt crisis, is now on the slide as Greece edges closer to doing the unthinkable - bringing back the drachma. The yen, which has long been an alternative or even superior safe haven to the dollar, is likely to lose favour after the Japanese prime minister vowed to halt its rise.

Germany probably sidestepped a double-dip recession in the first quarter, as resurgent industrial production and record external trade helped drive away the economic clouds settling over the rest of the eurozone.

Gross domestic product (GDP) data due to be published on Tuesday is likely to show Europe's largest economy grew by 0.1% between January and March, after contracting by 0.2% in the final quarter of 2011, according to analysts surveyed by Dow Jones Newswires.

While seemingly meagre, such growth would underline Germany's impressive resilience to the eurozone's two-year-old sovereign debt crisis.

By contrast, the bloc as a whole is forecast to have sunk into technical recession in the first quarter - defined as two consecutive quarters of shrinking gross domestic product - following Monday's weaker-than-expected industrial output data.

Even as economies across peripheral Europe have slumped into vicious recessions, Germany's economy expanded by 3% last year and as much as 3.7% in 2010. German unemployment is at a two-decade low of 6.8% and falling, corporate profits remain close to record levels and confidence indicators point to ongoing growth.

Last week, the economy ministry reported a stronger-than-expected 2.8% rebound in industrial production in March. That means industrial production rose 0.1% in the first quarter despite a weather-related dip in February. A drop in industrial production was a key reason for Germany's fourth-quarter GDP contraction.

Meanwhile, exports and imports both hit record highs in March, driven by business with countries outside the European Union. - I-Net Bridge

The Nigerian naira weakened against the US dollar on the interbank market.

The Nigerian naira weakened against the US dollar on the interbank market on Monday, as strong dollar demand for the local currency from fuel importers held down the local unit.

The naira closed at the interbank market at 157.95 to the dollar, weaker than the 157.75 it closed on Friday.

Traders some fuel importers were issued fresh import licences, boosting dollar demand. This was combining with insufficient dollar supply from oil companies were pilling pressure on the local currency.

“Some oil importers have been issued fresh round of licences to import fuel, while outflows to dividend payments by some companies are increasing demand for the dollar and putting pressure on the naira,” one dealer said.

Dealers said that although the state-owned energy company NNPC sold about $500 million to some lenders last week, the impact of the dollar sales on the naira was subdued because the company sold at a rate close to the prevailing market price, leaving too small a margin for lenders.

“We see rate crossing the 158 naira to the dollar mark by tomorrow (Tuesday) unless there is significant dollar flow from multinational oil companies to counter demand,” another dealer said.

At the official window, the central bank sold $150 million at 155.70 to the dollar, compared with $150 million sold at 155.75 to the dollar at last Wednesday's auction. - Reuters