The rand continued to strengthen in afternoon trade on Tuesday, hitting a best level of 7.76 at around 3.30pm amid a considerably weakened dollar and strongly performing equities on the local exchange, according to a Johannesburg-based trader.

At 3.43pm the rand was bid at 7.7992 to the dollar from its overnight close of 7.8250. It was bid at 11.1030 to the euro from a previous 11.1325 and at 12.8408 against sterling from 12.9403.

The euro was bid at US$1.4261 from US$1.4227 overnight.

A local trader said: "We have seen the rand gain steadily against the dollar throughout the day amid positive equity markets.

"We have also seen good support for the euro against a considerably weakened dollar, as has been the recent trend," he said.

Dow Jones Newswires reports that the euro remains near day-earlier levels against the dollar, as the market awaits testimony from Federal Reserve Chairman Ben Bernanke.

But the higher-yielding euro is favoured early on Tuesday morning, after a batch of better-than-expected US earnings reports spurred stocks and crude futures, encouraging traders to sell the safe-haven dollar and yen, and go into riskier currencies.

While the euro is up, it has yet to break the fresh six-week high struck on Monday, US$1.4250. Analysts say the euro is consolidating recent gains ahead of Bernanke's semi-annual address to Congress, scheduled to begin at 10am EDT.

However, traders already have an idea of what he will say from an article published in The Wall Street Journal, written by the chairman himself.

It explains how the Fed could exit its easing strategy, but offers little on when this will happen, except to say, "accommodative policies will likely be warranted for an extended period".

The euro's direction on Tuesday, and its response to Bernanke, will largely depend on the reaction in US equities markets. Gains in stocks will work to encourage risk appetite and have traders continue selling dollars.

Bonds surge in line with rand

Bonds surged forward during the afternoon session on Tuesday in line with the powerful-looking rand. However, a dealer told I-Net Bridge there may still be a few shorts out there hoping it doesn't strengthen too much further.

"If it goes past 8.400 percent, then it could go even lower as there could be a few guys that are short and are bluffing," he said.

"But I am not too sure how much further we can go from these levels," he added.

By 4.03pm the short-term government R153 bond was bid at 7.155 percent from a previous 7.185 percent. The medium-term R157 was at 8.450 percent from 8.510 percent, while the long-term R186 was at 8.940 percent from 9.010 percent before.

I-Net Bridge