Rand firms following euro bounce

Johannesburg - The rand firmed in the afternoon session on Tuesday tracking a euro recovery against the dollar.

At 15:45 the rand was bid at 7.5633 to the dollar from 7.6247 at its previous close. It was bid at 10.2918 to the euro from its previous close of 10.3368 and was at 11.3306 against the sterling from 11.4040.

The euro was bid at $1.3588 from $1.3560 previously.

A local currency trader said: "The euro bounced against the dollar, with the rand just keeping pace."

Dow Jones Newswires reported the euro rebounded from its lowest levels since May, gaining modestly against the dollar Tuesday after the Reserve Bank of Australia noted issues of sovereign debt could dent a global recovery.

The RBA overnight increased key interest rates, leading to a mild gain in the Australian dollar, but investors focused on the central bank's accompanying statement, which contrasted Australia's steady growth with continued pressures in other major economies.

"The RBA did note that the global economic recovery is still hesitant owing to the legacy of the financial crisis," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto.

Meanwhile, investors continued to pressure the pound, though pressure was much less intense than Monday's session after the most recent polls showed the chances of a hung Parliament - which could lead to political gridlock and put additional pressures on an already stressed economy, had eased somewhat.

Early Tuesday, the euro was at $1.3584 from $1.3559. The dollar was at ¥89.12 from ¥89.07, while the euro was at ¥120.72 from ¥120.79. The euro overnight sank to its lowest level since May 18 after investors sold off the common currency on the RBA's mention of sovereign debt concerns. It was able to recoup those losses to emerge modestly higher against the dollar by the early New York session.

The euro could see some support over the next few days if debt-pressured Greece introduces new austerity measures to convince the euro zone and markets it can get its fiscal house in order, said Brown Brothers Harriman analysts.

Not under the pressures faced in the eurozone, the RBA rose rates for the fourth time since the height of the financial crisis on Tuesday, raising key rates by 0.25% to 4%.

RBA Gov. Glenn Stevens said that inflation in Australia in 2010 would likely match expectations. He also said that concerns over "some sovereigns remain elevated", and that fiscal problems in Europe and elsewhere threaten the global economy.

Investors will now focus on the 09:00 EST, rate announcement from the Bank of Canada. Analysts do not expect the bank to raise rates, but will be listening for clues for future rate increases, or for jawboning to keep the appreciation of the Canadian dollar in check.

- I-Net Bridge