Barclays Capital regards this year's budget as broadly rand positive from a capital flow and sound macroeconomic policy perspective.

Barclays Capital regards this year's budget as broadly rand positive from a capital flow and sound macroeconomic policy perspective.

“The Treasury is subtly suggesting the ZAR could recover from current levels over the next few years and is also looking at reducing the country's foreign debt exposure,” said the group's analysts in their post Budget commentary.

Despite the recent recovery in the rand in recent months, the Treasury was quick to mention that the local unit remains susceptible to any shifts in the level of global risk appetite, which in turn rests heavily on the rate at which global output recovers over the coming years.

The Treasury acknowledged that the rand, together with a number of other emerging market currencies, has been the recipient of the sharp increase in global liquidity in recent quarters. This is in keeping with the renewed foreign appetite for SA bonds that we have seen since the start of the year, they added.

“These recent bond inflows have more than compensated for the foreign withdrawal from SA equities and in so doing ensured that there has been a net positive inflow of portfolio capital this year, after the severe sell-off during H2 11,” the analysts said.

In the year to date foreigners have been net buyers of R8.625 billion of local bonds.

They noted that it was also heartening to see that the officials are also clearly looking to attract increased levels of FDI, given that there is an emphasis to make it 'easier to do business in SA' and also an ongoing desire to promote greater investment into Africa through SA.

“From a trade flow perspective, the Treasury also placed increased attention on the export sector. In this regard, the authorities are looking to improve the country's network infrastructure so as to address the transportation bottlenecks that have has been cited as a reason for why SA has not taken as much advantage of the prevailing commodity boom as one might have expected,” they said.

They added that based on the government's intended foreign borrowing over the next three fiscal years, the rand is implied to average R7.30 over the corresponding period.

“While one shouldn't draw too much of an inference about the exchange rate from these projected foreign bond proceeds, they do imply that the Treasury is more constructive about the ZAR in comparison to both the prevailing spot rate and the ZAR forward curve,” they said.

As expected, there were no changes in exchange control regulation at this year's budget, but it was heartening from an external vulnerability perspective that the Government intends to significantly reduce its foreign debt levels as a percentage of overall debt over the coming years - from 19.9% to 2.9% by 2014/15.

“The authorities are also optimistic that SA sovereign rating outlook will not be downgraded, which would also be supportive for the ZAR from a country risk premia perspective,” they added. - I-Net Bridge

The rand was steady against the dollar in noon trade as it tracked a euro that was stuck in ranges as investors mulled the implications of the second Greek bailout.

The rand was steady against the dollar in noon trade on Wednesday as it tracked a euro that was stuck in ranges as investors mulled the implications of the second Greek bailout.

“There's also the Budget Speech to consider later on today, although I don't think we'll see anything major with regards to the rand,” a local currency trader said.

“However, players are reluctant to position heavily either way until they see what the Budget contains,” the trader added.

While Consumer Price Index (CPI) data had shown that inflation had moved higher and this was rand negative, the figures had not impacted the local currency, he added.

“Dollar rand is stuck in a 7.64 to 7.75 range at present and looking ahead I see a weaker rand.”

At 11:33 local time, the rand was bid at R7.7260 to the dollar from its previous close of R7.7313. It was bid at R10.2182 to the euro from R10.2386 before, and at R12.1567 against sterling from R12.1995 previously.

The euro was bid at US$1.3221 from its previous close of US$1.3249.

Earlier Statistics SA said the increase in SA's CPI was 6.3% year on year (y/y) in January from 6.1% y/y in December.

The inflation rate was expected to have ticked up slightly to 6.2% y/y in January, according to a survey of leading economists by I-Net Bridge. Forecasts among the economists ranged from 6.1% to 6.3%.

At 14:00 local time, SA Finance Minister Pravin Gordhan will deliver his Budget Vote Speech.

Meanwhile Dow Jones Newswires reported that in European markets, the euro traded in tight ranges against the dollar as doubts remained on Greece's ability to put its debt load on a sustainable footing.

Although Greece had, in principle, secured a second bailout deal, there were still many questions to be asked about implementation and how effective the deal would be.

The next step was to see how willingly private sector creditors would participate in the deal. The Institute of International Finance had negotiated a deal on behalf of private holders of Greek debt that would see a 53.5% reduction in the nominal value of their holdings.

There are, however, still concerns about contagion risks.

Dominic Rossi, global chief investment officer of equities at Fidelity Worldwide Investment said: “A Greek default has been priced into equity markets but what is far less clear is the implications for other nations, particularly Portugal, Spain and Italy. Whilst we appreciate progress has been made, particularly in Italy ... this remains a multi-year workout during which they will remain vulnerable to external shocks such as a Greek default.”

In fact, Portugal's 10-year government bond yield did not paint a pretty picture as in European trade mid-morning, its yield was up 3.90 basis points at 12.031%.

And purchasing managers' figures for the eurozone's largest economies were also a little disappointing.

French business activity grew at a reduced pace in February. The composite purchasing managers' index for France fell to 50.6 in February from a five-month-high of 51.2 in January. A reading above 50 signals growth. - I-Net Bridge

The rand was flat against the dollar in early morning trade as it tracked a euro that lacked direction.

The rand was flat against the dollar in early morning trade on Wednesday as it tracked a euro that lacked direction.

“Our market is also lacking direction today and it looks as if the rand is going to move into ranges,” a local currency trader said.

He put dollar rand in a range of 7.70 to 7.78 for the first half of the trading day.

While SA Finance Minister Pravin Gordhan was due to deliver his Budget Speech later today, the trader said that this was not expected to be a rand moving event.

“Maybe the Budget Speech will move bonds, but I don't think it'll impact on the currency - and the same for CPI data due out this morning.”

At 08:33 local time, the rand was bid at R7.7342 to the dollar from its previous close of R7.7313. It was bid at R10.2375 to the euro from R10.2386 before, and at R12.2087 against sterling from R12.1995 previously.

The euro was bid at US$1.3239 from its previous close of US$1.3249.

Statistics SA is expected to release the CPI figure for January this morning. CPI is seen as coming in at around 6.2% from 6.1% in December.

Barclays Capital said in a note on Wednesday morning that yesterday's price action was a classic example of “buy the rumour sell the fact”, because once EU finance ministers had agreed to grant Greece more financial assistance after weeks of deliberation, the rand sold-off.

“Doubts over whether Greece can actually reduce its debt to 120% of GDP by 2020 as well as the adverse growth implications associated with yesterday's extended surge in energy prices curbed global risk appetite.”

Barclays Capital added that this morning's sub-50 PMI (which implies contraction) Chinese manufacturing data was not helping global sentiment either, and explained why Asian equity markets were in the red this and why the dollar was regaining favour.

Meanwhile Dow Jones Newswires reported that the euro remained range-bound during Asian trading on Wednesday as caution over whether Greece could follow through with reforms after an ambitious 130 billion euros rescue deal prevented the common currency from moving in a clear direction.

Tuesday's agreement by euro-zone finance ministers would see Greece's private creditors take a loss of 53.5% on their Greek bonds in order to put the debt-laden country on a sustainable footing and avert a catastrophic default.

But the deal still faced several hurdles, including the successful completion of a bond swap offer to private creditors, as well as parliamentary approvals in Germany, Austria, Finland and the Netherlands.

Investors were also watching to see if Greece could smoothly carry out the reforms it had agreed to as part of the deal.

“While the Greek government averted the risk of defaulting on bond redemption payments due in March, work remains over its fiscal austerity and implementation of economic reforms,” said Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ.

“The sense of caution over the future of the European debt crisis remains strong, weighing on the market,” she said.

Junya Tanase, chief forex strategist at JP Morgan in Tokyo, said that while the agreement on a fresh bailout had improved investor risk sentiment, lingering uncertainty over Greece had kept stocks and yen crosses from further substantial gains.

“The market will continue to be susceptible to news and headlines,” he said.

Looking forward, the global markets were expected to watch a meeting of finance officials from the Group of 20 advanced and developing nations in Mexico this weekend for any further developments on international support for the euro-zone. - I-Net Bridge

The euro eased against the dollar in Asia as enthusiasm over the eurozone agreement on a Greek rescue faded due to concerns more must be done to get the country back on track.

The euro eased against the dollar in Asia Wednesday as enthusiasm over the eurozone agreement on a Greek rescue faded due to concerns more must be done to get the country back on track.

The single currency changed hands at $1.3233 and 105.71 yen in Tokyo afternoon trade, compared with $1.3238 and 105.50 yen in New York late Tuesday.

The dollar edged up to 79.89 yen from 79.69 yen.

On Tuesday, the European single currency jumped more than a US cent within minutes of the announcement of a deal approving a 237-billion-euro rescue for Greece, before it eased back throughout the day.

Analysts warned the nation's economy remains in a parlous state and Athens faces a giant task in sticking to tough reforms over the coming years.

“Investors will pay attention to the G20 finance ministers' meeting in Mexico” this weekend, said Masafumi Yamamoto, currency analyst at Barclays Capital.

“But expectations are low that the meeting will come up with some positive headlines” after the Mexican and Japanese finance ministers said a deal on specific amounts to support the eurozone was unlikely, he said.

Japanese finance minister Jun Azumi said Tuesday that the G20

was not yet ready to agree on providing more funds to the International Monetary Fund to fight Europe's debt crisis.

He said this weekend's meeting would give the group a chance to “examine progress in the European situation”.

The dollar was mixed against other Asian currencies, rising to 1,126.00 South Korean won from 1,123.40 won, to 42.82 Philippine pesos from 42.66 pesos, and to Sg$1.2586 from Sg$1.2536.

It was flat at 9,045.00 Indonesian rupiah and at Tw$29.56, but slipped to 30.67 Thai baht from 30.75. - Sapa-AFP

The rand fell against the dollar in late afternoon trade as it tracked a euro that had seen its gains reverse as investors became nervous about the implementation of the second Greek bailout.

The rand fell against the dollar in late afternoon trade on Tuesday as it tracked a euro that had seen its gains reverse as investors became nervous about the implementation of the second Greek bailout.

“Lots of people were expecting the bailout and it was priced into the markets,” a local analyst said.

“Now that the second Greek bailout is through, focus is shifting to other periphery nations like Portugal and investors are realising that the fundamentals in Europe are still not very good - and yes, Greece got the bailout but it's still in a poor situation.”

The analyst added that locally, the fact that the Budget speech would be delivered in parliament by Finance Minister Pravin Gordhan on Wednesday, had also had an effect on the local currency.

“The bond sell-off has put pressure on the rand, given the outflows,” he said, referring to the fact that local bonds were softer on worries that the country's borrowing requirements would increase as economic growth failed to meet expectations, thereby hitting revenue from taxation.

At 15:43 local time, the rand was bid at R7.7275 to the dollar from its previous close of R7.6805. It was bid at R10.2070 to the euro from R10.1480 before, and at R12.1804 against sterling from R12.1587 previously.

The euro was bid at US$1.3209, the same as its previous close.

Meanwhile Dow Jones Newswires reported that the euro had given up most of its overnight gains made earlier in Asian trade as investors fretted over Greece's capacity to make the required savings after eurozone finance ministers finally agreed a second bailout package for the country.

The single currency initially gained around 0.8% after the Euro group said it had approved an EUR130 billion bailout that would stop Greece defaulting on bond redemption payments due on March 20. The single currency rose to a 12-day high of $1.3293 in the immediate wake of the news but then faded.

“It has been a very choppy and slightly directionless session so far in Europe. There is a sense that it remains vulnerable, even though we have apparently seen a conclusion to the latest chapter in the long-running Greek debt saga,” analysts at Citigroup wrote in a note to clients. - I-Net Bridge

The rand was flat against the dollar in noon trade as it tracked a euro that had been flustered by reports that Greece might still need a third bailout.

The rand was flat against the dollar in noon trade on Tuesday as it tracked a euro that had been flustered by reports that Greece might still need a third bailout.

“The euphoria is wearing off as the Greek deal was already priced into the markets,” a local currency trader said.

“The markets are still worried about Greece and certain news reports haven't helped,” he added.

“I see a weaker euro looming and therefore a weaker rand as markets haven't been wowed by the approval of the second Greek bailout,” the trader said.

At 11:37 local time, the rand was bid at R7.6962 to the dollar from its previous close of R7.6805. It was bid at R10.1994 to the euro from R10.1480 before, and at R12.1913 against sterling from R12.1587 previously.

The euro was bid at US$1.3259 from its previous close of US$1.3209.

RMB said in a note on Tuesday morning that the market had responded towards the Greek bailout agreement with a big yawn.

“After weeks of anxiously waiting, the deal is an anti-climax. Part of the reason is that some eurozone members do not believe a second bailout will resolve Greece's problems.

“Particularly damning has been a strictly confidential report prepared for eurozone members, obtained by the Financial Times, suggesting another bailout will be needed. Surprise, surprise, the bailout simply means that Greece lives to die another day.”

Meanwhile Dow Jones Newswires reported that although the euro was still up against the dollar in European markets, trading had been cautious.

Commerzbank said scepticism was justified and added that even with the Greek bailout, the majority of market players were finding it hard to believe that Greece would get through to 2020 without a further default.

Many investors were concerned that the Greek general election, expected in April, might bring in a government unwilling or unable to implement stringent austerity measures.

In addition to this, the UK's Financial Times reported that Greece might still need a third bailout as the forced austerity could cause debt levels to rise, and its debt restructure could prevent Greece from ever returning to financial markets.

“The crisis marathon is not over,” warned Carsten Brzeski, economist at ING Bank NV. “The combination of more austerity, social unrest and European impatience could become explosive, with a high risk that the Greek crisis could still derail.”

Brzeski added that the second bailout package had again bought time for other “peripheral” eurozone countries to show that they were different from Greece and to put all available “anti-contagion firewalls” into place. - I-Net Bridge

The rand was flat against the dollar in noon trade as it tracked a euro that had been flustered by reports that Greece might still need a third bailout.

The rand was flat against the dollar in noon trade on Tuesday as it tracked a euro that had been flustered by reports that Greece might still need a third bailout.

“The euphoria is wearing off as the Greek deal was already priced into the markets,” a local currency trader said.

“The markets are still worried about Greece and certain news reports haven't helped,” he added.

“I see a weaker euro looming and therefore a weaker rand as markets haven't been wowed by the approval of the second Greek bailout,” the trader said.

At 11:37 local time, the rand was bid at R7.6962 to the dollar from its previous close of R7.6805. It was bid at R10.1994 to the euro from R10.1480 before, and at R12.1913 against sterling from R12.1587 previously.

The euro was bid at US$1.3259 from its previous close of US$1.3209.

RMB said in a note on Tuesday morning that the market had responded towards the Greek bailout agreement with a big yawn.

“After weeks of anxiously waiting, the deal is an anti-climax. Part of the reason is that some eurozone members do not believe a second bailout will resolve Greece's problems.

“Particularly damning has been a strictly confidential report prepared for eurozone members, obtained by the Financial Times, suggesting another bailout will be needed. Surprise, surprise, the bailout simply means that Greece lives to die another day.”

Meanwhile Dow Jones Newswires reported that although the euro was still up against the dollar in European markets, trading had been cautious.

Commerzbank said scepticism was justified and added that even with the Greek bailout, the majority of market players were finding it hard to believe that Greece would get through to 2020 without a further default.

Many investors were concerned that the Greek general election, expected in April, might bring in a government unwilling or unable to implement stringent austerity measures.

In addition to this, the UK's Financial Times reported that Greece might still need a third bailout as the forced austerity could cause debt levels to rise, and its debt restructure could prevent Greece from ever returning to financial markets.

“The crisis marathon is not over,” warned Carsten Brzeski, economist at ING Bank NV. “The combination of more austerity, social unrest and European impatience could become explosive, with a high risk that the Greek crisis could still derail.”

Brzeski added that the second bailout package had again bought time for other “peripheral” eurozone countries to show that they were different from Greece and to put all available “anti-contagion firewalls” into place. - I-Net Bridge

The rand remained firmer against the US dollar in late afternoon trade.

The rand remained firmer against the dollar in late afternoon trade on Monday. It tracked a euro that had been buoyed by positive sentiment that a second Greek bailout would be approved later in the day.

“The rand has done pretty well today, outperforming most of its peers,” a local analyst said.

“The local currency benefited strongly from news on the weekend that China would cut its reserve requirements for banks and also from the general improvement in risk appetite ahead of the meeting of the eurozone finance ministers later today,” he added.

The analyst said it was “very likely” that the finance ministers would approve Greece's second bailout - “but not certain”.

At 15:34 local time, the rand was bid at R7.6652 to the dollar from its previous close of R7.6834. It was bid at R10.1642 to the euro from R10.1728 before, and at R12.1528 against sterling from R12.2227 previously.

The euro was bid at US$1.3265 from its previous close of US$1.3223.

Meanwhile Dow Jones Newswires reported that a nervy but buoyant tone prevailed in European trading hours on Monday with the euro moving higher against the dollar after Germany's central bank provided an upbeat assessment on the outlook for its economy, and expectations rose that eurozone finance ministers would agree on a second bailout for Greece later in Brussels.

The 17-country currency rose to a fresh one-week high against the buck after the Deutsche Bundesbank wrote in its monthly bulletin for February that the outlook for the German economy had “perceptibly” improved. That, together with expectations Greece would receive a new 130 billion euros loan deal later Monday, boosted investor sentiment across markets with European stocks moving higher and yields on Italian 10-year government bonds falling to their lowest level since October.

The People's Bank of China's move on Saturday to cut banks' reserve-requirement ratio by 0.5 percentage points, effective February 24, also supported confidence in a global growth rebound.

But it wasn't all positive, as details on the Greek deal were still lacking, and the International Monetary Fund said it was likely to offer minimal funds for the second Greek aid package. Greece, and other eurozone nations, also still had a long way to go before returning to growth.

“Most people realize Greece's problems are far from over and yes a default may be avoided next month but we will continue to hear bad news from Greece and potentially from other countries in the eurozone over the next few months,” said Jane Foley, a currency strategist at Rabobank in London. - I-Net Bridge

The rand remains slightly firmer against the dollar in noon trade as it tracks a euro that has been modestly impacted by rumours.

The rand remains slightly firmer against the dollar in noon trade on Monday as it tracks a euro that has been modestly impacted by rumours that there will be a delay to Greece's second bailout package.

With no economic data due on Monday and US markets closed for President's Day, the euro is prone to move on any news about Greece or the eurozone.

“It's a big day for Greece and it seems as though European finance ministers will at last approve the bailout,” a local currency trader said.

“There was also the easing of reserve requirements for banks by China over the weekend and this has impacted favourably on the rand,” he added.

The trader said that volumes were “a bit lower” as the US celebrated a public holiday. He confirmed that the euro had “come off slightly” during morning trade on rumours that the bailout would be delayed. “But it wasn't a big reaction and we are looking for further strength in the rand.”

At 11:42 local time, the rand was bid at R7.6779 to the dollar from its previous close of R7.6834. It was bid at R10.1489 to the euro from R10.1728 before, and at R12.1746 against sterling from R12.2227 previously.

The euro was bid at US$1.3218 from its previous close of US$1.3223.

RMB said in a note on Monday morning that it appeared as though Greece would “live to die another day”.

“There are reports that telephonic talks between the eurozone finance ministers over the weekend went very well and they are more or less set to approve Greece's second bailout in face-to-face talks that start at 18:00 SA time today.”

RMB said that if a bailout was forthcoming, it would move Greece away from the brink of a disorderly default.

“This doesn't imply that Greece's problems are over. There are questions on whether enough debt is being written off, and whether Greece will implement its fiscal targets and enough structural reforms to get the economy growing again.”

Meanwhile Dow Jones Newswires reported that eurozone finance ministers were scheduled to meet in Brussels to discuss the implementation of Greece's rescue package. The deal was widely expected to be signed off.

UniCredit said: “Chances that a deal will be agreed have increased, as the Greek government approved additional measures to meet the extra budget cuts [EUR325 million] demanded by the Troika.”

However, there was some confusion on Monday after a statement on the Finnish Finance Ministry's website that said Greece's second bailout would likely get final approval in the week starting March 12. The euro slipped momentarily against the dollar on the news. - I-Net Bridge

The rand was slightly firmer against the dollar in early morning trade as it tracked a euro that was steady on hopes that a second bailout for Greece would be secured today and as risk appetite grew.

The rand was slightly firmer against the dollar in early morning trade on Monday as it tracked a euro that was steady on hopes that a second bailout for Greece would be secured today and as risk appetite grew.

“It seems as if all the single currency is doing is awaiting an announcement out of Europe on Greece,” a local forex trader said.

He put dollar rand in an initial range of 7.64 to 7.74.

“It's a holiday today in the US so barring any surprises, we should have a quiet day.”

At 08:31 local time, the rand was bid at R7.6713 to the dollar from its previous close of R7.6834. It was bid at R10.1294 to the euro from R10.1728 before, and at R12.1674 against sterling from R12.2227 previously.

The euro was bid at US$1.3211 from its previous close of US$1.3223.

Barclays Capital said in a note on Monday morning that hopes that EU finance ministers would sign off on another tranche of financial assistance for debt-laden Greece later today, together with China's central bank's weekend decision to reduce the required reserve holdings for the banking sector had bolstered risk appetite.

“Commodity prices are also firmer and the dollar is softer across the board.” Barclays Capital added.

It said the rand had gone into the weekend on the front foot and had maintained a firmer bias this morning, which had opened the door for a move back down to R7.65 if not the R7.60 area ahead of this week's budget speech on Wednesday.

Meanwhile Dow Jones Newswires reported that the euro remained steady during Asian trading on Monday on hopes that a bailout package for Greece was coming together, with euro-zone finance ministers seeking to close the deal during a meeting scheduled for later in the day.

Optimism toward an approval of a second 130 billion euros Greece bailout package and 200 billion euros of debt restructuring buoyed the common currency against the dollar and the yen. That came despite the International Monetary Fund saying it was likely to offer minimal funds for the second Greek aid package.

Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ said the euro might have more upside ahead if the terms of a Greek bailout were successfully worked out later in the day.

“Anticipation is rising that an agreement on support measures could be reached at today's euro-zone finance ministers' meet,” she said. - I-Net Bridge