The rand remained range bound in noon trade on Wednesday with attention focused on global markets and Thursday's rate decision by the European Central Bank amid rising risk aversion.

By 11.40am the rand was bid at 7.8531 to the dollar from a previous close of 7.8726. It was bid at 12.4000 to the euro from a previous 12.4443 and at 15.5968 against sterling from 15.6991 before.

The euro was bid at US$1.5796 from US$1.5793 overnight, while gold was quoted at $936.25 a troy ounce from $940.70 overnight.

RMB analysts said in their morning report for this week the European markets are dominating.

"International market turmoil yesterday was driven by fears over rising EU inflation and all eyes are on tomorrow's ECB rate meeting. Conditions will remain tough and we should look for volatility ahead. For now though, after initially tracking the EU markets lower US equities at least managed to bounce back and this should ease some of the pressure in Europe today," they said.

For the rand, the prospect of rising EU rates even while the Fed remains on hold is helping through a higher EUR/USD.

"The speculation over the potential collapse of the Reliance/MTN deal meanwhile should be seen as ZAR positive. The current proposed deal would just involve a share swap and so generate no actual inflows but if the deal fails then it opens up the way for other suitors and another deal structure," RMB added.

They expect the rand to stabilise in a 7.82 — 7.92 range.

Dow Jones Newswires reports that rising risk aversion is taking its toll on the dollar in Europe Wednesday.

However this hasn't stopped the yen from falling even further than the US currency after the Nikkei Index fell for the tenth day in a row - the longest consecutive decline since 1965.

Analysts suggested that currencies are unlikely to show any sustained moves as many market participants are probably squaring positions or withdrawing from the market ahead of the European Central Bank's policy meeting and June non-farm payrolls, both of which come Thursday.

Bonds recover by 9.5 bp

Bonds recovered up to 9.5 basis points on Wednesday morning, in what traders say may be a reaction to Tuesday's oversold position.

By 11.30am the short-term government R153 bond was at 11.800 percent from its previous close of 11.890 percent, while the medium-term R157 was at 10.765 percent from a previous 10.865 percent. The long-term R186 was bid at 10.550 percent from a previous 10.635 percent.

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