Johannesburg - The rand held steady against the dollar on Tuesday and could attempt another rally towards R7.80/$ as the market anticipates a resolution to Europe's debt crisis and looks to the medium term budget for pointers on the domestic growth outlook.
Government bonds were steady ahead of the budget speech, but could retreat later if Finance Minister Pravin Gordhan signals more debt issuance over the next three years to plug a wider deficit than predicted in February.
The rand was at 7.8805 to the dollar by 07:03 GMT, little changed from Monday's close at 7.88.
The rand surged more than 2.3% to a week's high on Monday, helped by renewed optimism that a summit of European leaders this week will come up with concrete measures to stem a debt crisis that has triggered a sell-off of emerging market assets in recent months.
"It looks like the Europeans are going to come with some kind of agreement tomorrow and we're all sitting in anticipation of that," Bidvest Bank chief dealer Ion de Vleeschauwer said, adding the rand was also being boosted by month-end dollar selling as exporters repatriate funds.
"The 7.80 level is kind of crucial because we tried it again about two weeks ago and it bounced quite significantly from there, so there's obviously keen importer interest down there," De Vleeschauwer said.
"But if the euro pushes significantly higher and we go through 1.40 on euro/dollar then we could see a push stronger for the rand."
Traders said the market did not expect significant shifts in exchange policy from Gordhan which might impact on the rand. He is due to start speaking at around 12:00 GMT.
Bonds held their ground in early trade, with the yields on the heavily traded 2015 and 2026 issues steady at Monday's closing levels of 6.73% and 8.48% respectively.