Rand slightly firmer against dollar on steady euro

Rand a tad firmer against dollar in thin early-morning trade on Tuesday as it tracks a euro that appears to have steadied

The rand was a tad firmer against the dollar in thin early-morning trade on Tuesday as it tracked a euro that appeared to have steadied somewhat.

"We’re really in pre-Christmas thin trade mode, and markets have started to square positions," a local rand trader said. "The death of the North Korean leader is no longer that important and we’re just keeping an eye on the euro."

At 8.35am local time, the rand was bid at R8,3726 to the dollar from its previous close of R8,3852. It was bid at R10,8934 to the euro from R10,9031 before, and at R12,9935 against sterling from R12,9973 previously.

The euro was bid at $1,301 from its previous close of $1,3005.

Meanwhile, Dow Jones Newswires reported that the euro was steady against the dollar on Tuesday in Asia, while other higher-yielding currencies such as the Australian dollar and the Korean won rose, amid improved risk-sentiment as most Asian stock markets recovered the day after the news of Kim Jong-il’s death.

Most Asian stock markets were modestly higher on Tuesday and the Korean won rose versus the dollar amid receding concerns that the death of the North Korean leader, announced on Monday, might spur instability in the region.

"While G-10 currencies showed little movement, the Korean won was bought back after being sold off yesterday," said Atsushi Hirano, head of FX sales in Japan at the Royal Bank of Scotland, adding that regional currencies such as the Australian dollar followed suit.

The Reserve Bank of Australia’s December 6 policy meeting minutes, which showed that the relative health of the Australian economy argued against cutting rates, helped the Australian dollar, dealers said.

Improved sentiment provided some support for the risk-sensitive euro, but the region’s continuing European sovereign debt crisis weighed on the common currency.

The focus was now shifting to the European Central Bank’s (ECB) announcement of its long-term refinancing operation results on Wednesday.

"The key is the amount," said Kenichiro Ikezawa, fund manager at Daiwa SB Investments.

A substantial amount would suggest banks are taking in funds to reinvest them in sovereign bonds, Mr Ikezawa said.

"That’s why the ECB introduced the operation," he said, but "if the amount is insubstantial, then that’s a worry."

Meanwhile, the safe-haven yen remained in demand versus the dollar and the euro as fears of a slowdown in the US economy were stoked by the threat of a new year’s tax increase in the US, with Congress deadlocked over legislation to extend a payroll tax break and unemployment benefits, dealers said.

Elsewhere, Japan’s government said on Tuesday that it would boost the size of its war chest to intervene in the foreign exchange markets by ¥30000bn to be able to flexibly respond to "any movement" in the currency market.