The rand was range bound in midday trade on Tuesday as a resilient euro shrugged off concerns about political developments in France and the Netherlands.

"The euro has been surprisingly resilient given the problems in Europe. It may be that people are just sitting out for the moment until after the US has made a decision on whether to ease monetary conditions or not," a local trader said.

The US Federal Open Market Committee is meeting today and tomorrow. The Federal Reserve chairman will hold a media briefing on Wednesday evening SA time.

At 11:40 local time the rand was bid at R7.8316 to the dollar from its previous close of R7.8406. It was bid at R10.3062 to the euro from R10.3146 before, and at R12.6482 against sterling from R12.6398 previously.

Gold was trading at US$1637.42 per ounce.

The euro was bid at US$1.3164 from its previous close of $1.3154.

Poor politics and even worse economics put global markets under pressure again yesterday and it looks as if the sentiment could extend into today, RMB said in its morning report.

"USD/ZAR reached a high of 7.88 and while it is back at 7.86, it risks edging into the 7.90s. Commodities haven't escaped the selling - the oil price dipped below US$118/bbl and gold fell by nearly 1 percent."

"The fall of the Dutch government after failing to agree to a budget has jolted markets. And coming right after the French vote that showed strong support for extreme candidates, and plurality of support to the socialists, has created an impression of a Europe that is rejecting fiscal austerity. We now need to worry about Holland and Hollande," they wrote.

Dow Jones Newswires reported the euro was range bound against the US dollar as investors were hesitant to take significant positions before the results of this week's US Federal Open Market Committee meeting.

"Looking ahead, [Tuesday's] bond auctions from Italy, Spain, and the Netherlands will provide the next test of market sentiment," said Mike Jones, currency strategist at Bank of New Zealand. "However, the FOMC meeting [outcome] will capture most of the market's attention ... Overall, we suspect the Fed statement will [toe] the same cautious line as last time."

With Spanish fear reaching a crescendo, France injected yet another element of uncertainty into a whipsawed market, and raised the stakes for the euro. According to some analysts, the shifting of Europe's political winds may put France back into a similar predicament as last year, when contagion fears sent French bond yields higher and routed bank stocks.

"As one small measure of this we therefore note that while France did hold a successful bond auction last week, the premium it has to pay over Germany to borrow continues to increase, rising back above 154 [basis points] this morning for the first time since late November," said analysts at Bank of New York Mellon.

Bonds softer after 'poor' auction

South African bonds drifted higher in quiet midday play on Tuesday after what a trader described as a "poor" government bond auction.

At its weekly auction, the National Treasury received bids totalling R2.55 billion for R1.1 billion worth of R203 bonds at a clearing yield of 7.020 percent, bids totalling R860 million for R500 million worth of R209 bonds at a clearing yield of 8.780 percent and bids totalling R1.33 billion for R500 million worth of R214 bonds at a clearing yield of 8.750 percent.

At 11:50, the benchmark R157 bond was trading at 6.510 percent from its previous close of 6.520 percent. The R207 was bid at 7.585 percent and offered at 7.560 percent from a previous close of 7.580 percent and the R186 bid at 8.195 percent and offered at 8.175 percent from its close of 8.170 percent.