Currencies (8 June 04)

The rand was weaker against major currencies in late afternoon trade yesterday as it continued to correct after its rally in recent weeks.

A softer euro added to the negative picture.

A currency trader said that while the softer euro was contributing, the rand's weakness was for the most part a correction from its rally in recent weeks, which saw it quoted as strong as R6,3350 to the dollar on June 2 after trading above R7 as recently as May 11.

There is bid (dollar) resistance at R6,62-R6,63 which should hold for now. We are seeing buying out of London and exporters out of Johannesburg, but the buyers are winning.

The traders aid that the euro had weakened on the back of comments by US Federal Reserve chairman Alan Greenspan . Greenspan said that federal reserve board rate hikes were likely to be measured in scope, but the US central bank is 'prepared to do what is required' to fight inflation.

Boosted by relatively tough comments from Federal Reserve Chairman, in which he expressed concern about bubbling US inflation pressures, the dollar mostly strengthened yesterday.

Higher interest rates, particularly if the central bank is deemed to be in control of inflation rather than 'behind the curve' enhance a currency's appeal to foreign investors.