Johannesburg - The South African rand remained weak against the US dollar overnight, in a continuation of the trend set late on Thursday when the dollar firmed across the board after data showed new-home sales in the US soared in April, bringing hope to the long-depressed housing sector.
By 9.00am the rand was bid at R7.1235 per dollar from Thursday's New York close of R7.1338. It was bid at R9.5719 to the euro from a previous R9.5866 and at R14.1631 against sterling from Thursday's R14.1570.
The euro was bid at $1.3432 from $1.3430 overnight, while gold was quoted at $654.85 an ounce from its previous close of $653.40.
ETM analysts said in their morning report that stronger than anticipated new home sales out of the US late on Thursday has boosted sentiment towards the greenback as investors continue to adjust for a stronger US growth outlook and the rising probability that US rates will remain on hold for a while to come.
"However, what was good news for the USD was not particularly good news for US stocks which lost ground across the board. We recently spoke of the loss in upside momentum on Wall Street and yesterday's data appears to have been the catalyst for some profit taking as it triggered fears that a rate cut would no longer be on the cards any time soon."
"We have also spoken of the correlation between the performance on Wall St and the behaviour of the rand and the fact that a sell-off in US equities tends to lift overall levels of risk aversion," they said.
They added that it should come as no surprise that the VIX - the cost of buying an out of the money put option on the S&P 500 - jumped sharply to 14.08 reflecting fears of a more pronounced retreat.
"The consequences of this have been painfully obvious as emerging market currencies weakened across the board. Couple this to the recovery in the JPY which will raise fears of another round of carry trade unwinding and emerging market currencies could come under even greater pressure."
"Of only concern is the extent to which the ZAR has weakened through the course of the week. It has been a particularly bad week for the ZAR and if there are significant long USD-ZAR positions out there, there might be appetite for some profit taking heading into the weekend," they said.
AFX reported from Sydney that the US dollar was weaker against the yen here and firmer against the euro while currency markets remain rangebound given the lack of fresh data and the upcoming Memorial Day long weekend in the US, said dealers.
They said despite further US housing data due tonight with the release of existing home sales for April, as well as a German consumer confidence survey for June and preliminary estimate of UK growth for the March quarter, the major currency pairs are likely to remain unchanged.
Dealers said traders are also seen taking a cautious approach ahead of a number of US economic data releases next week, as well as the Federal Reserve meeting on Wednesday. - I-Net Bridge