Graphic: renjith krishnan

The rand was steady on Wednesday morning as global sentiment improved somewhat and it tracked a firm euro.

At 08:45 local time the rand was bid at R7.7803 to the dollar from its previous close of R7.7795. It was bid at R10.2584 to the euro from R10.2588 before, and at R12.5381 against sterling from R12.5484 previously.

The euro was bid at US$1.3195 from its previous close of $1.3197.

RMB analysts said in their morning report that from the worries of Monday, the rand has gone back to strength, pushing below key support for tests into the R7.70s.

“With yesterday's move, the rand has outperformed its compatriot currencies, presumably reflecting the on-going strong bond inflows: another R2.2bn yesterday, taking it up to R13bn since last Tuesday. Either the bond index reweighting is causing some real money flows or it's causing some very aggressive speculation,” they said.

The also noted that global sentiment is better this morning given the ability of the Netherlands, Italy and Spain to auction debt yesterday, calming fears over Europe, while Wall Street was lifted overnight by continued good corporate earnings announcements that offset uninspiring economic data.

Looking ahead to today's events, they noted that through the day there will be a string of ECB policymakers talking, while UK 1Q12 GDP data will indicate if they managed to avoid a recession. In addition, US durable goods data will be out early afternoon and the Fed will be in the spotlight this evening.

Dow Jones Newswires reports that the US dollar held steady against the euro ahead of the outcome of a meeting of the US Federal Open Market Committee later in the global day.

The Federal Reserve's “rate decision will be critical to determine the US dollar's direction over coming sessions,” said Credit Agricole strategist Mitul Kotecha.

“Assuming that the Fed does not alter its policy setting but instead only tinkers with its economic forecasts, the US dollar will escape any further selling pressure. Any reference or hint to further quantitative easing would play negative for the US dollar but we do not expect this to occur,” Kotecha said. - I-Net Bridge