Currencies (21.6.04)

The rand firmed to near two-and-a-half week highs against the dollar on Friday as the greenback tumbled after a report showing a record US current account deficit in the first quarter of this year.

The US current account deficit widened to $144,9bn, exceeding economist's forecasts of $141bn - giving the euro a lift against the greenback. The euro is the currency of SA's main trading partner and often influences the rand's direction.

The rand firmed to an intraday peak of R6,42 to the dollar, its best level since June 1 when it closed at R6,40, according to Reuters data. By late afternoon the rand was trading at R6,4375 against the dollar compared with R6,54 at open.

Analysts said despite data raising the prospects of higher interest rates in the US, technical charts pointed to further dollar weakness, which should help the rand to strengthen this week.

The rand fell to R6,6335 to the dollar last Monday partly blamed on plans by a US and Malaysian group, Thintana to dispose of a portion of its shareholding in domestic telecoms utility Telkom.

On Friday, Thintana said it had sold 83-million Telkom shares to institutional investors at R73 a share.

But analysts said they did not expect the outflow of about R6,5bn rand from the transaction to affect the rand greatly.

The dollar fell broadly on Friday, pushed down by a report that showed the US current account gap widened more than expected in the first quarter.

By early afternoon, the dollar deepened its decent in thin pre-weekend trade that was partly technically driven, traders said.