The rand was firmer against the dollar in early morning trade on Monday. It was tracking a euro that had steadied itself in Asian trade following news that Greece had approved a set of austerity measures.
"The rand has recovered from the non-event the Reserve Bank announced on Friday and from last week’s news from Greece," a local currency trader said.
"Greece looks like its managing to sort itself out and this has helped the euro a bit and therefore the rand," he added.
At 8.45am local time, the rand was bid at R7,6720 to the dollar from its previous close of R7,7433. It was bid at R10,1565 to the euro from R10,2254 before, and at R12,0998 against sterling from R12.1933 previously.
The euro was bid at $1,3245 from its previous close of $1,3239.
RMB said in a note that the uncertainty created in the lead up to the announcement of the new rand bank notes was only a minor contributor to the rand’s weakness on Friday. The real underlying issue was a sharp bout of risk-off as concerns over Greece and general pessimism did the rounds.
"We start the week on a better note. Greece’s parliament has passed the additional reforms insisted upon by the EU and global markets are rallying again.
"The rand is therefore reversing some losses, with moves on US$/ZAR back into the 7.60s this morning. Whether the rand bull market will resume again is, however, very much open to question, for now it looks as though we are due for sharp swings but in a R7,55-R7,75 range."
Meanwhile Dow Jones Newswires reported that the euro had gained during Asian trading on Monday as the Greek parliament approved austerity measures needed for the country to get a fresh bailout, although on-going violence in Athens and defections within the coalition reminded traders that lasting relief was far from assured.
"The market will continue to fret this week over Greek-related headlines," said Junya Tanase, chief FX strategist at JP Morgan in Tokyo.
Although the austerity measures were widely backed on a 199-74 vote, Athens still had to win approval from euro-zone finance ministers meeting on Wednesday for its €130bn bailout, and it hadn’t sealed a deal with private creditors on the haircut they would take on their holdings of government bonds.
The yen recovered, meanwhile, from an earlier dip following news that Japan’s economy shrank an annualised 2,3% in the fourth quarter from the previous three months. This was the fourth drop in five quarters and worse than the forecast 1,6% decline, as exports and manufacturing faltered on weak overseas demand, the strong yen and flooding in Thailand, a key manufacturing centre for many Japanese companies.
Barclays Capital chief Japan strategist Masafumi Yamamoto said some German policymakers who were doubtful about Greece’s ability to implement the approved austerity deal might prevent the eurozone from providing Greece the much-needed bailout money.
He also warned that further risks might be lying ahead if the private-sector creditors’ expected voluntary write-down turned out to be insufficient to calm the market’s concern.
Koji Fukaya, director of fixed income and global foreign exchange research at Credit Suisse in Tokyo said there might be further space for euro short-covering through the week, although the gains may be limited due to lingering concerns over the future of Greek negotiations.
"Even if the austerity measures are approved (by the euro-zone finance ministers), there still remains the question of whether or not they can actually be implemented," he said.
