The rand held up against the dollar in late afternoon trade on Tuesday as it continued to track the euro.
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Rand steadies against dollar, eyes euro
"The moves were small today and the rand has firmed up slightly late in the session," a currency analyst said.
"It's really just a paring of yesterday's move when the rand fell quite sharply," he added.
He said the rand/dollar had run out of momentum struggling to break above 7.06.
"But I feel the dollar could extend its rally into June and July - however, the rand will fall far less than expected with around 7.20 possible."
At 15:55 local time, the rand was bid at 6.9927 against the dollar from its previous close of 7.0040. It was bid at 9.8660 to the euro from 9.8570 before and at 11.2848 against sterling from 11.2917 at its previous close.
The euro was bid at US$1.4108 from US$1.4033 before.
Meanwhile, Dow Jones Newswires reported that the euro retreated from the day's highs against the dollar on Tuesday after Greece's opposition leader, Antonis Samaras, rejected the country's new austerity plan, paring the single currency's earlier gains.
The euro had climbed steadily against the dollar for most of the European morning as healthy German business confidence data and the absence of fresh bad news on the euro-zone crisis boosted investor sentiment.
Building on gains made during the Asian session, the euro briefly breached US$1.41 against the dollar to trade as high as US$1.4116. But the fall from the day's highs suggested currency traders remained wary of further adverse developments in Greece and the rest of the euro-zone periphery, despite a modest tightening in regional sovereign bond spreads.
"It would not take an awful lot of negative news to throw the market into another wobble. The politicians still have a lot to do to restore confidence," said Jane Foley, senior currency strategist at Rabobank in London.
For Foley, further contagion in Spain would be a key driver for the euro, which has so far managed to hold above a key chart level at US$1.3975.
"It's a bit of a house of cards. Spain would be the next card and then Belgium and Italy are next in the line of fire," she added.
Euro-zone debt concerns have weighed heavily on the single currency in recent weeks but a robust German May Ifo reading reminded markets that the euro still reflected German economic might as well as the euro-zone's more fragile peripheral states.
German business confidence data beat expectations to hold steady in May at 114.2, near February's record high of 115.4. The current conditions sub-index hit a new record high but expectations for the next six months dipped, reflecting concerns about higher euro-zone rates, strategists said.
