Graphic: renjith krishnan

South Africa's rand steadied against the dollar on Wednesday and was expected to trade in a tight range ahead of a crucial weekend election that will determine Greece's future in the euro zone.

At 08:37 SA time, the rand ticked down to 8.391, largely unchanged from Tuesday's New York close of 8.39. The currency is expected to trade within 8.35 to 8.50 per dollar from now until the end of the week.

Since the start of the week, the unit has been buoyed by Citi's confirmation it will include South African debt in its prestigious world bond index, opening the door for major portfolio inflows.

But deepening concerns around the Greek election on June 17 that would bring to power parties opposed to its current bailout plans and force a disorderly exit from the single currency have left investors on edge.

“Markets remain very cautious and tentative ahead of the Italian auction this week as well of the Greek elections on Sunday,” said Brigid Taylor, head of institutional sales at Nedbank.

“A lot of position-flattening in the market is causing it to be relatively range-bound. We still like rand weaker, because we think there is a lot of contagion that still remains in the system and uncertainty.”

If Greece were to leave the euro zone, emerging market currencies such as the rand would be hit on a negative risk sentiment.

Yields on the benchmark bonds slid just one basis point to 6.22 for the three-year note and 8.29 for the 14-year bond. - Reuters