The rand was softer against the dollar in early morning trade on Thursday as it tracked a faltering euro.
"Here we go again. Yesterday morning there was some good news for the euro but today there isn’t," a local currency trader said.
"After the European summit at the weekend, these wild swings should stop and we should get some direction — I’m being optimistic," he added.
He put dollar rand at 8.00 to 8.10 for the initial part of the trading session.
"We’re still so very euro dependent," he said.
At 08:20 local time, the rand was trading at R8.0682/$ from its previous close of R8.0383/$. It was trading at R11.0469/€ from R11.0667/€ before, and at R12.6714/£ from R12.6769/£ previously.
The euro was at $1.3694 from $1.3762 before.
RMB currency strategists said in a morning note that dollar rand was edging upwards again, driven both by an underperformance that was becoming more pronounced and by questions whether Europe was going to pull together at this weekend’s meeting.
"Today’s risks seem to be clearly for a break to the top-side."
RMB added that European policymakers seemed to have a sense of urgency at least.
"Politicians hurried through a second bailout for Greece in July, just in time for them to jet off for their summer holidays. President Sarkozy rushed to Berlin to meet with Chancellor Merkel to discuss unresolved issues yesterday."
Agreement seemed to have been reached that Greece would suffer a larger default.
"How large is still probably open to question, but at least one box is ticked."
There also seemed to be agreement that the banks would have to raise new capital, RMB added.
"The worry here is that Europe may once again fudge the tests on how much cash is needed: today’s Financial Times reports that the EU thinks only 80 to €90bn, a lot lower than the €200bn estimated by the IMF and private sector.
"The real issue, though, is over expanding the bailout fund: France wants it turned into a bank that can leverage off the ECB — an idea strongly opposed by Germany and the ECB itself."
RMB said it meanwhile, still had very little information on why the rand was such an underperformer.
"The default answer is that there is a large deal going through the market — but this is a pretty unhelpful conclusion. We can add, however, that foreign portfolio inflows have been a little disappointing of late and that October generally sees a rush of imports ahead of the festive season."
Meanwhile Dow Jones Newswires reported that the euro fell against the dollar and yen in Asia on Thursday, as uncertainty remained over whether progress would be made on the European debt crisis at a key summit this weekend.
Ahead of the meeting of European leaders, investors said they were confused by a succession of news headlines on supposed developments in tackling the crisis that seemed to contradict each other.
"In the end, we’ll have to wait for the outcome of these meetings," said Kosuke Hanao, a senior dealer at HSBC.
Meanwhile the Japanese government was expected to announce by the end of this week the finalized version of a package of steps to deal with the strong yen that it has been working on since August.
Dealers said the announcement was unlikely to have a major impact on the currency markets because the steps were likely to aim at exploiting the merits of the strong yen, rather than trying to directly weaken the currency.
Looking ahead, investors were expected to pay attention to US economic indicators and moves in US Treasury yields to gauge a trading direction for the dollar against the yen, Barclays Capital chief strategist Masafumi Yamamoto said.
