Rand takes a break as Greece deal stutters

huge political dilemma; they’ve got to cut spending and wages while faced by elections in the coming months,” Ian Cruickshanks, head of treasury strategic research at Nedbank , said yesterday.
Greece faces a possible election in April, making it difficult for its current leaders to agree to severe austerity measures, such as cuts of 25 percent in wages.
If Greece does not get a rescue package, the country risks a default and being expelled from the 17-member euro currency zone. One of the drawbacks of Greece returning to the drachma could be runaway inflation. European leaders stepped up pressure on Greek politicians yesterday to accept the conditions for a €130 billion bailout, saying time was running out.
The rand, one of the best-performing emerging market currencies against the dollar this year, weakened as much as 1,8 percent, before recovering to trade at R7,57/US$1 in the late afternoon.
So far this year, the rand has appreciated 6,2 percent against the dollar – its strongest start to the year since 2006, boosted by improved sentiment towards risky emerging market assets.
“We see a 65 percent chance that Greece will get the new support programme and be kept in the euro,” Christian Schulz, senior economist at Berenberg Bank, said in a note yesterday.
The South African stock market shed 0,6 percent yesterday, its first decline in five days of gains. The JSE All-Share has gained 6,9 percent this year, its strongest start to the year since 2006. Concern over Greece brought a rally in global shares to a halt yesterday, while the euro reversed losses as some shorts covered their bets.
US stocks edged lower, tracking European equities, while a gauge of global shares dipped for the first session in five.
Still, the declines were not enough to derail an uptrend of five successive weeks of gains on both the US benchmark S&P 500 and global stocks measured by MSCI.
The underlying sentiment in markets remained positive due to strong economic data from the US, China and Germany last month. – Reuters.