The rand was softer against the dollar in noon trade on Friday as it tracked a euro that had come under pressure, following investors' reassessments of moves made on Thursday to prevent a liquidity crisis in the eurozone.
"The euro is a bit weaker - in fact it's back to levels we saw before the announcement of the currency intervention yesterday afternoon," a market analyst said.
"I haven't seen any news flow that would have done this - so maybe it's just a paring of yesterday's gains."
The analyst added that it appeared the market hadn't taken too seriously the announcement that central banks would provide US dollar liquidity to the eurozone.
"They probably realise that it's just a short term fix."
At 11:43 local time, the rand was bid at 7.3992 to the dollar from its previous close of 7.3775. It was bid at 10.2106 to the euro from 10.2323 before, and at 11.6797 against sterling from 11.6493 previously.
At 12:41 gold was trading at US$1777.52 per ounce.
The euro was at US$1.3796 from US$1.3865 before.
RMB analysts said in a morning note that markets had rallied sharply as global central banks stepped in to calm banking liquidity fears by promising unlimited US dollar funding and coincidentally foreigners returned as net buyers of SA bonds yesterday, taking up R2.3 billion.
Together, this had allowed dollar rand to retrace into the high 7.30s, with some further mild downside possible today. Underlying banking, economic and PIIGS [Portugal, Italy, Ireland, Greece, Spain] problems, however, remained unresolved so continued volatility and risks of new highs next week could be expected.
"The ECB, BoE, BoJ and SNB will provide unlimited three-month USD funding to banks from October. This action is similar to what they offered during the heart of the crisis and again temporarily in May 2010 when the Greek problems first broke.
"It reduces the immediate squeeze for US dollars in the market, taking away a lot of the pressure for the US dollar to appreciate. The help for banks, notably those in Europe, is large, with some French bank share prices rallying over 20 percent yesterday.
"However, it does not alter the solvency issue and as was the case in the crisis, this will not necessarily open up the money markets as banks will continue to worry about counterparty risk."
RMB said attention now shifted to government policymakers as urgent action was now needed to stop the rot in Greece, kick European policymakers into agreement on how to act, and draw a line under the mounting European banking sector problems.
"Expect comments even over the weekend. Late today we will receive the US University of Michigan consumer confidence data."
Meanwhile Dow Jones Newswires reported that the euro was coming under some pressure against the dollar, as the greenback regained some of its losses seen after the decision by the central banks to pump dollars into the European banking system.
Investors were rethinking their initial reaction to Thursday's news of concerted central bank action to provide US dollar liquidity to Europe.
The first reaction was positive, but now there was a feeling that the coordinated move highlighted just how serious the European banking crisis had become.
