Johannesburg - The rand was sharply firmer against the dollar in midday trade on Tuesday - trading below the 8 rand level against the US unit - as it tracked the euro amid an improvement in global risk appetite on hopes that further progress will be made towards agreeing a means of tackling the European debt crisis.
At 11:50 local time, the rand was bid at 7.9158 to the dollar from its previous close of 8.0293. It was bid at 10.7001 to the euro from 10.8658 before, and at 12.2937 against sterling from 12.4957 previously.
The euro was at $1.3514 from $1.3514 before.
"The rand is following the euro which has firmed quite a bit. The market has also been a bit short and we've seen some export selling which have also helped the rand," a local currency trader said.
Another trader said the rand had come off its worst levels along with the euro, and that the main driver would continue to be a possible solution to the euro crisis.
"We will continue to be driven by any news from Europe," he said.
He added that he expected the recent wide range to prevail, with good support for the rand at 7.85 and the top of the range at 8.35.
RMB analysts said in their morning report that the global uprising against Eurozone policymakers over the weekend appears to have prompted a series of bold reforms to allay market anxiety. On the face of it, equity and currency markets appear stronger but the extent of intraday moves, particularly on USD/ZAR, reflects immense uncertainty.
"Though slightly stronger, USD/ZAR is still vulnerable to considerable weakness in the near-term as scepticism over Europe's ability to curb the crisis prevails. Broad trading ranges are likely to be sustained, though upside pressure should abate as event risk subsides and conditions begin to normalise. In other words, once a firm resolution to the debt crisis is found," they wrote.
Dow Jones Newswires quoted Bank of England policy maker Adam Posen as saying on Tuesday that the euro zone will overcome its debt crisis and the single currency will be "fine".
"I do believe the euro will be fine, I do believe the crisis will be resolved," Posen said in a speech at a conference in Berlin. "We have faith there will be a solution."
But he warned that a solution that involves tighter fiscal rules for members of the currency bloc would lead to "very low growth".
"Will that be an attractive place for new members to join, will that be an attractive place in which to invest? These are all good questions," he said.
