The volatile rand was firmer in early Monday trade on news that pro-austerity parties in Greece are front runners ahead of the critical poll next month and also that that a rescue fund for troubled Euro-region banks was being mooted.
Reports suggested that the plan involved taking control of Europe's struggling banks and importantly funding would be levied on the same banks.
The news from Europe was perceived as positive news for risk-currencies which bounced back after being under pressure for much of this month.
The rand strengthened on the news on Greece. The local currency is still vulnerable - the weekend development helps but the election has to go through at the moment the market remains vulnerable a local trader said.
At 8.34 the rand was bid at R8.2937 to the dollar from Fridays close of 8.3547.
It was bid at R10.4480 to the euro from Fridays close of R10.5058 and at R13.0107 against sterling from R13.1088 at the previous close.
The euro was bid at US$1.2609 from Fridays close of $1.2677.
In their morning report Absa Capital said the rand weakened a further 1.2 percent versus the dollar last week and is now 6.6 percent down versus the USD month-to-date. The bank however noted the ZAR strengthened by 0.6 percent against the EUR last week but is still down 1.7 percent for the month.
These relative performances demonstrate that a significant part of the ZARs weakening in recent weeks has been a function of the stronger USD environment. Participants have sought the perceived the safety of the greenback due to the uncertainty surrounding the global growth outlook and concern about the EU debt crises Absa said.
Absa added that weekend reports that pro-austerity parties are front runners for this months Greek elections have eased some of these fears Absa however expected market sentiment to remain broadly tentative until the outcome of next months Greek elections (17 June).
Dow Jones Newswires reported that the euro rose against the dollar and the yen Monday in Asia amid some relief after Greece opinion polls showed Sunday that the pro-bailout New Democracy conservatives overtook the far-left anti-austerity Syriza ahead of a general election set for June 17.
The yen's downside was limited however on buying amid expectations for bids from Japanese exporters at month-end in otherwise quiet trading with the U.S. market closed for a holiday Monday Tokyo dealers said.
The rise in support for Greece's New Democracy party should give it the ability to form a coalition government with a smaller socialist party that shares its backing for reforms Greece agreed to with European and international creditors in exchange for a EUR130 billion bailout package. The outcome of earlier elections held May 6 were inconclusive.
The latest developments prompted market participants to trim some of their massive bets on the euro's downside as concerns eased that Greece would exit the euro-zone in the near term.
On Friday a report from the Commodity Futures Trading Commission showed that as of the preceding Tuesday traders on the Chicago Mercantile Exchange held the largest net wagers on the euro's fall and the dollar's climb since at least 2007.
"As for Greece there is a sense of relief for now amid expectations that pro-austerity parties are going to win" said Michiyoshi Kato senior vice president of forex sales at Mizuho Corporate Bank.
But analysts say it is premature to identify any lasting trends as the euro-zone copes with a range of other problems.
"You can't relax your guard as concerns remain over the problem in Spain. There still is a good likelihood that the euro will fall to test the $1.20 mark" Mizuho's Kato said.
Elsewhere market participants largely shrugged off comments by Swiss central bank President Thomas Jordan in an interview published Sunday with Swiss weekly Sonntagszeitung. Jordan said Switzerland may introduce capital controls to fight a sharp rise in the franc in the case of a possible euro-zone collapse.
"We need to remember that this is a contingency plan" said Masashi Murata senior currency strategist at Brown Brothers Harriman in Tokyo. He added however that Switzerland contemplating such a scenario shows how close a Greek exit might be and said he expects similar views from other financial institutions soon.
The market will focus on any European debt-related headlines for the remainder of the global day.
Bonds quiet due to US holiday
South African bonds were marginally firmer in quiet early morning trade on Monday as the Memorial Day holiday in the US meant that volumes were low.
At 08:52 the benchmark R157 bond was trading at 6.320 percent from Fridays close of 6.340 percent. The R207 was bid at 7.540 percent and offered at 7.520 percent from a previous close of 7.550 percent and the R186 was trading at 8.280 percent from its close of 8.300 percent.
Lower prices for consumers are expected as Telkom prepares to split its retail and wholesale divisions.
A convicted Hout Bay businessman has been ordered by a US court to pay R295m restitution to SA.
An agreement was reached between parties involved in a chicken import duty cost hike court application.
