The rand was firmer in midday trade on Wednesday as foreign investors preferred the rand over the euro ahead of the European Union summit later in the week.

“We are seeing good foreign demand as well as exporters repatriating before the June month-end‚ so we expect the rand to strengthen into the weekend‚” a local trader said.

Foreigners were net buyers of R4.520 billion of South African bonds including repo transactions on Tuesday.

At noon the rand was bid at R8.3991 to the dollar from its previous close of R8.4233. It was bid at R10.4934 to the euro from its previous close of R10.5208 and at R13.1235 against sterling from R13.1662 before. The euro was bid at US$1.2493 from its previous close of $1.2491.

Dow Jones Newswires reported that the budget committee of Germany's parliament on Wednesday approved legislation to create a permanent eurozone bailout fund and ratify the European fiscal pact on improving integration of eurozone budgets‚ according to a parliamentary official.

The vote in committee sets the stage for parliamentary approval to create the European Stability Mechanism (ESM) and ratify the fiscal pact in a vote by the full assembly on Friday evening.

Passage of the ESM and the fiscal pact is all but certain following an agreement between the government coalition parties and the main opposition. The legislation must pass with a two-thirds majority in both the upper and lower houses of parliament.

Bonds firmer amid foreign demand

South African bonds were stronger in midday trade on Wednesday with good demand for local paper seen from overseas investors.

“Local bonds are 6 basis points firmer today and if the rand goes below R8.41 we can expected another 4 basis points firmer‚” a local trader said.

At 11:34‚ the benchmark R157 bond was trading at 6.020 percent from Tuesday’s close of 6.060 percent. The R207 was bid at 7.180 percent and offered at 7.170 percent from a previous close of 7.225 percent and the R186 was trading at 8.010 percent from its previous close of 8.060 percent.