Rand edges weaker in tight range

JOHANNESBURG (Reuters) - South Africa's rand edged weaker on Tuesday but kept to a tight range and may still trend firmer on the back of solid global equities and positive emerging market sentiment, traders said.

The local currency was trading at 7.2160 to the dollar at 1520 GMT, almost 0.3 percent off its previous New York close of 7.1975 against the greenback. It ranged between 7.1888 and 7.2290 during the session.

Dealers said the rand was rangebound, taking its cue from other emerging markets, but appeared to be ignoring a stronger gold price.

"There is a slight bias to strengthen with emerging markets looking positive," a Johannesburg-based trader said, adding the rand was likely to drift between 7.18 and 7.23 to the dollar.

Some traders attributed initial rand strength to speculation that South Africa was in line for an imminent credit ratings upgrade.

IMF urges continued buildup of forex reserves

THE INTERNATIONAL Monetary Fund has urged the Bangko Sentral ng Pilipinas to further beef up its gross international reserves, now at a record high of $23.76 billion, while maintaining a flexible exchange rate policy.

In its 2006 country report, the IMF executive board said the BSP's current policy to deal with the upward pressure on the exchange rate was "broadly appropriate" but cited the merits of further building up the GIR while the foreign inflows were strong.

"Going forward, we urge continued exchange rate flexibility, even though further reserve accumulation might be justified given that the exchange rate does not appear to be mis-aligned," the IMF board said.

The peso is now trading at a six-year high against the US dollar. On Friday, the local currency peaked at 48.265 before closing at 48.305 to $1.

Currency Traders Pay Biggest Premium in 3 Years for Yen Calls

Currency traders are paying the most in almost three years for options that protect against a potential rebound in the yen versus the euro, before Group of Seven finance officials meet in Germany later this week.

Investors are hedging against the chance G-7 nations try to support the yen after it fell last month to a record low against the euro. German Finance Minister Peer Steinbrueck last week said the G-7 will discuss the drop in Japan's currency, which has weakened as the Bank of Japan kept its benchmark interest rate at 0.25 percent, the lowest among major economies.

Traders are buying insurance against an unraveling of the so-called carry trade, in which investors borrow in Japan and buy debt in economies such as the euro region, where they can get 2 percentage points or more in extra yield.

US Treasury secretary says Japan allows the yen's value to be set ...

Treasury Secretary Henry Paulson said Tuesday that he was not concerned about the lows being set by the Japanese currency against the U.S. dollar because those values are being set in open markets.

Paulson was pressed on the issue during congressional testimony by Rep. Sander Levin, who questioned why the Bush administration was not doing more to encourage the Japanese government to halt the slide in the yen against the dollar.

American automakers believe that decline has given their Japanese competitors a tremendous price advantage.

Levin, whose state has car manufacuting plantsd, said that European auto companies were complaining about the yen's decline against their currencies. He suggested that Paulson should join forces with European finance ministers to lobby Japanese officials on the issue when the countries meet for the Group of Seven finance ministers meeting in Essen, Germany this weekend.