Graphic: renjith krishnan

The volatile rand was firmer in midday trade on Monday‚ tracking the euro‚ which gained against the dollar as global sentiment on the region remained positive.

The local currency had a slow start in early trade but stabilised on news that last week’s ECB summit had agreed to a banking union. The regulatory body to be set up under the control of the ECB‚ would be able to recapitalise banks directly.

“This is a major step in reducing the threat of another financial crisis. It is particularly important for Spain‚ where the banking sector problems threaten to bring down the whole economy‚” RMB said on the developments.

Analysts observed that stability in the eurozone would have a domino effect on emerging markets.

“The euro has stabilised and as long there are no funny headlines from Europe the rand will remain stable‚” a local trader said.

At 11:51 the rand was bid at R8.1224 to the dollar from its previous close of R8.1534. It was bid at R10.2638 to the euro from its previous close of R10.3206 and at R12.7258 against sterling from R12.7786 before.

The euro was bid at US$1.2639 from its previous close of $1.2658.

Meanwhile Dow Jones Newswires reported that the French government needs sizeable changes to the 2012 and 2013 budgets meet deficit targets‚ the country's top auditor said on Monday.

The Court of Accounts said the government needs to raise as much as 10 billion euros ($12.7 billion) this year and about EUR33 billion next year to bring the budget deficit down to 4.4% of gross domestic product in 2012 and to 3% in 2013.

The report comes as France appears to be at risk of becoming the next victim to spillover effects from the eurozone debt crisis‚ which has forced five countries to seek international aid‚ and has pushed borrowing costs for Spain and Italy up to unsustainable levels.

“France is at a crucial time in the straightening up of its public finances‚” Didier Migaud‚ the Court of Accounts head‚ said in a press conference following the release of the report. “The financial situation of our country remains clearly preoccupying.”

The French government has already acted to correct a budget slippage that is mainly due to ailing economic growth. The weakness of the eurozone's second-largest economy came in full light as Finance Minister Pierre Moscovici on Sunday cut this year's growth forecast to 0.4% from 0.5% previously‚ and said the economy won't expand by 1.7% next year. - I-Net Bridge