The rand seems to have completely ignored the Euro in afternoon trade on Tuesday, shrugging off the prevailing unstable European political situation, a trader said.
The problems in Europe saw the resignation of the Dutch Prime Minister Mark Rutte after his right-wing parliamentary partner walked out of austerity talks.
"I think the rand performed better than expected. It seems to have benefited from the situation in Europe, and we appear to be ignoring the Euro. We'll wait for the outcome of the Federal Open Market Committee meeting, which is currently underway," said the trader.
At 15:47 local time the rand was bid at R7.7817 to the dollar from its previous close of R7.8406. It was bid at R10.2710 to the euro from R10.3146 before, and at R12.5632 against sterling from R12.6398 previously.
The euro was bid at US$1.3207 from its previous close of $1.3154.
Poor politics and even worse economics put global markets under pressure again yesterday and it looks as though the sentiment could extend into today, RMB said in its morning report.
"USD/ZAR reached a high of 7.88 and while it is back at 7.86, it risks edging into the 7.90s. Commodities haven't escaped the selling - the oil price dipped below US$118/bbl and gold fell by nearly 1%."
"The fall of the Dutch government after failing to agree to a budget has jolted markets. And coming right after the French vote that showed strong support for extreme candidates, and plurality of support to the socialists, has created an impression of a Europe that is rejecting fiscal austerity. We now need to worry about Holland and Hollande," they wrote.
Dow Jones Newswires reported the euro was range bound against the US dollar as investors were hesitant to take significant positions before the results of this week's US Federal Open Market Committee meeting.
"Looking ahead, [Tuesday's] bond auctions from Italy, Spain, and the Netherlands will provide the next test of market sentiment," said Mike Jones, currency strategist at Bank of New Zealand. "However, the FOMC meeting [outcome] will capture most of the market's attention ... Overall, we suspect the Fed statement will [toe] the same cautious line as last time."
With Spanish fear reaching a crescendo, France injected yet another element of uncertainty into a whipsawed market, and raised the stakes for the euro. According to some analysts, the shifting of Europe's political winds may put France back into a similar predicament as last year, when contagion fears sent French bond yields higher and routed bank stocks.
"As one small measure of this we therefore note that while France did hold a successful bond auction last week, the premium it has to pay over Germany to borrow continues to increase, rising back above 154 [basis points] this morning for the first time since late November," said analysts at Bank of New York Mellon.
