Picture: REUTERS
Picture: REUTERS

THE rand strengthened against the dollar on Tuesday afternoon on better-than-expected eurozone purchasing managers’ index (PMI) data.

"We’ve seen support around the R8.90 level become sustained on the positive euro data," said Kuziva Muganiwa, a global markets analyst at Vunani Capital.

According to figures released by Markit, the composite PMI for the eurozone last month came in at 48.6, up from 47.2 in December. The services PMI for the region for last month also came in at 48.6, up from December’s 47.8.

"Because Europe is our biggest trading partner, any positive sentiment is immediately felt by the rand."

Although PMI figures were positive, eurozone retail sales were cause for concern. The European Union’s statistics agency said on Tuesday that retail sales fell 0.8% in December from November, and 3.4% compared with December 2011.

At 4.02pm‚ the rand was bid at R8.8846 to the dollar from Monday’s close of R8.9085, and Friday’s close of R8.8527. The local currency was bid at R12.0137 to the euro from its previous close of R12.0352 and at R13.9531 against sterling from R14.0325 before. The euro was bid at $1.3518 from Monday’s close of $1.3510.

Mr Muganiwa said there was still risk on the downside to the rand in the short to medium term because of uncertainty over economic policy in the eurozone periphery.