Johannesburg - The rand was steady against the dollar in midday trade on Friday, amid an improvement in global risk appetite after reports that France's credit rating would be downgraded by Standard & Poor's proved false.
At 12:00 local time, the rand was bid at 7.9574 to the dollar from its previous close of 7.9648. It was bid at 10.8408 to the euro from 10.8417 before, and at 12.6444 against sterling from 12.6941 previously.
The euro was at $1.3628 from $1.3608 previously.
"At first, the rand strengthened as the Sarb (South African Reserve Bank) left the repo rate at 5.5%, but then it weakened on reports that France's credit rating would be downgraded by S&P. However, when these reports proved false, the euro recovered, global risk appetite improved, and the rand returned to its earlier level," Standard Bank said in its morning note.
The bank said risk appetite also benefited from better-than-expected US employment data on Thursday.
"This price action underscores just how susceptible the rand is to shifts in international sentiment, in itself being driven by the EU debt crisis and global growth fears. We still recommend buying dollar dips within a R7.70 to R8.20 range into year-end, but the risk lies in an upward breach of this range," it said.
Sarb governor Gill Marcus said there was some debate on a rate cut but the decision to hold was unanimous. "It is a balance between issues as inflation will be out of the (3% to 6%) range for longer," she said.
The rate was cut by 50 basis points to 5.5% in November 2010 and was the lowest reading in almost 30 years, resulting in a real interest rate of about 1%.
"Inflation is out of target for longer and that is our primary responsibility" she said.
Earlier on Thursday ANC Youth League leader Julius Malema - a strong advocate of the idea of nationalisation of SA's mines - was suspended from the league and was told that he had to vacate his position.
The news moved the local equities market.
"While it is unlikely that yesterday's domestic developments would have had a significant impact on the ZAR, it is worth noting that the Sarb's decision to keep interest rates on hold should ensure that SA's interest rate markets remain attractive to foreign investors," said Rand Merchant Bank in its daily currency report.
"This will pull capital into SA once the uncertainty facing the European region abates," it said.
Meanwhile, Dow Jones Newswires reported that in foreign exchange markets the euro regained some lost ground, but traders were sceptical of a sustained rebound.
"An easing of political stresses from Greece and Italy are unlikely to offer a lasting reprieve for the euro. Indeed, next week we get bond supply from Italy, Spain and France that may test investor appetite in this unsettled environment," Brown Brothers Harriman said in a note to clients.