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 | forex market analysis
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As At 27/01/2012
| CURRENCY | BUY | SELL | | USD | 82.00 | 84.25 | | EURO | 108.90 | 111.45 | | POUND | 129.85 | 132.40 | | YEN | 169.02 | 169.58 | | SA Rand | 9.75 | 11.80 | | KSH/UGS | 24.73 | 30.95 | | Australian $ | 85.58 | 87.53 |
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| | Market Analysis Report | Kenya's shilling closed firmer for the third straight session on Thursday, unphased in the final minutes of trading by the finance minister's resignation following his indictment earlier this week for crimes against humanity. Pressure had piled up on Uhuru Kenyatta to quit the Treasury after the International Criminal Court ruled on Monday he must face trial for crimes committed during violence after a disputed 2007 poll. At the 1300 GMT market close, commercial banks quoted the shilling at 84.80/85.00 against the dollar, nearly one percent stronger than Wednesday's close of 85.50/70. Market players said tight liquidity and dollar inflows from offshore clients had supported the shilling on Thursday. The Central Bank of Kenya had sought to mop up 5 billion shillings through repurchase agreements, but received no bids. Determined to keep the shilling on an even keel after its collapse last year, the central bank has been busy absorbing liquidity and selling hard currency. Traders said high yields on Kenyan government securities were enticing foreign investors, leading to high subscription rates in recent auctions and injecting dollars into the market. In the money market, the weighted average interbank lending rate rose to 21.1 percent on Wednesday, from 20.3 percent on Tuesday, pushed by banks competing for the few shillings in the market after central bank tightened liquidity through repos. The euro traded unchanged against the dollar on Thursday, after earlier hitting a five-week high, as moves to cover bets against the currency petered out as a Fed induced rally faded. The Fed on Wednesday pushed back the likely timing of an eventual interest rate hike until late 2014, 18 months later than previously suggested, lifting riskier assets such as the euro. Federal Reserve Chairman Ben Bernanke also said the U.S. central bank was ready to offer additional economic stimulus. The euro has been prone to bouts of strength for most of the past week as investors scrambled to cover large bets against the single currency amid optimism Greece will reach a deal with its creditors and avoid a disorderly default. The euro hit a session high of $1.3184 before paring gains to trade at $1.3100, unchanged on the day. Some analysts saw the euro's early strength driven by data indicating the U.S. economic recovery is gaining traction. While first-time claims for U.S. jobless benefits rose in the latest week, the underlying trend pointed to improvement in the labor market. The government separately reported orders for U.S. manufactured goods rose more than expected in December. The euro slid against the dollar in afternoon trade as the Fed's rate pledge failed to spark a breach in a key technical level in the pair. The failure of EUR/USD to breach the 61.8 percent retracement of the $1.3550 high in December to the $1.2624 low on Jan. 13 was behind the euro's drop, according to Brian Dolan, chief currency analyst at Forex.com in Bedminster, New Jersey.
Sterling fell to a near four-week low against the euro on Thursday on hopes of progress in Greek debt talks and worries about UK economic weakness, but the pound hit a five-week high against a broadly weaker U.S. dollar. Reports that private holders of Greek debt would accept a lower coupon on new bonds, and a successful short-term debt auction in Italy, encouraged investors to cut hefty short positions in the euro. Sterling also came under pressure versus common currency on expectations the Bank of England will resort to further monetary stimulus. Those expectations have increased after data on Wednesday showed the UK economy contracted by 0.2 percent in the fourth quarter of 2011, putting it on the brink of recession. The euro rose around 0.3 percent on the day to 83.99 pence, its strongest since Dec. 30. Traders cited offers around 84 pence which capped near-term gains in the single currency as it eased back to 83.70. Resistance was the Dec. 29 high of 84.22. However, sterling rose against the dollar, buoyed as the U.S. currency came under broad selling pressure after the Federal Reserve said on Wednesday it would keep interest rates near zero until late 2014 and may opt for more stimulus.But he saw the euro's strength as temporary and expected safe-haven flows into sterling to continue as investors fret over the euro zone crisis. Against the dollar, sterling rose to $1.5719, its strongest since Dec. 22. Further gains could see it target the Dec. 21 high of $1.5775, though traders cited offers at around $1.5730. Sterling was trading around $1.5693 late in the London afternoon. Analysts said poor fundamentals in the UK may limit any upside for sterling against the dollar.
The rand neared a three-month high against the dollar on Thursday, breaking through tough resistance as a global risk rally saw investors turn to higher-yielding assets, pushing South Africa bond yields down 19 basis points as well. Global markets were buoyed by positive data out of the United States and signals from the U.S. Federal Reserve that interest rates would remain near zero for another few years. The rand gained 1.4 percent against the dollar to 7.7785 on the day, a level last seen on Oct. 31. The local unit has broken through 8 rand to the dollar and then 7.90 resistance this week but could have its gains capped by good two-way interest. Market players speculated the central bank had been in the market to build up its dollar reserves, prompting the rand to retreat from its highest levels but the amounts were insignificant and the move was countered by risk-on sentiment. Indian stock, bonds, currency and commodity markets are closed on Thursday for Republic Day. Trading will resume on Friday. |
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