The rand was slightly weaker in early trade on Thursday, still following the euro, which is not doing much, a local trader said.
At 9.07am the rand was bid at 7.4000 to the dollar from 7.3600 at its previous close. It was bid at 11.0985 to the euro from its previous close of 11.0468 and was at 12.2482 against sterling from 12.2187.
The euro was bid at $1.5001 from $1.4984 overnight.
"We are very slightly weaker, still following the euro which is not doing much," the trader said.
"The pound has been the biggest mover. The rand, above 38 has potential to move to 48.
"When the euro breaks 49-50 we will see moves back to the 30s," he said.
Said an RMB analyst in a morning report: "New lows are being made every day on USD/ZAR, but the moves seem to be increasingly hard work. Reflecting this, downside moves have shifted from a consistent 10 cents per day last week to 5 cents a day this week.
"EUR/USD remains the dominant driver, with spikes through 1.50 yesterday allowing USD/ZAR to manage 7.34/35, which to some extent has sustained despite EUR/USD dropping back."
The analyst said the continued surge in the gold price, up at $1120 an ounce this morning, is certainly a help, and so too the general rise in the commodity basket.
"Still, it all comes back to EUR/USD. Unless trade gets sustainably through EUR/USD1.50, USD/ZAR downside will fade away. Eurozone industrial production data at midday today offers some risk, but probably the key will be tomorrow's eurozone GDP and US consumer confidence data. For now trade looks to remain in the 7.34 — 40 range.
"Both major SA business news papers are, meanwhile, running stories this morning disputing that the ZAR is too strong. The FT meanwhile reports how emerging market countries are all battling with currency strength. Yesterday Taiwan became the latest country to impose capital controls on inflows. Local manufacturers at least possibly might get some relief; Chinese official comments this morning suggest that they are preparing to let the yuan (CNY) start appreciating again," they said.
Dow Jones Newswires reported that major currency pairs are narrowly mixed, with the bias still tending toward a weaker dollar.
Kathy Lien, chief currency strategist at Global Forex Trading in New York, noted that "$1.50 is a very significant psychological resistance level" for the euro.
The dollar may slide an additional 5 percent to 7 percent against the euro and the Australian dollar, given the "weak outlook for the US economy and the dovishness of the central bank," Global Forex Trading's Lien said. That could push the euro to as high as $1.60 and the Australian dollar may hit 0.9950, she said.
"The direction is still for a lower dollar," said John McCarthy, manager of currency trading at ING Capital Markets in New York.
"Positive risk sentiment, reinforced [on Wednesday] by the better-than-anticipated Chinese data and the fact that interest rates will remain low around the world" will continue to put pressure on the dollar, he said.
Bonds eye rate cut
Bonds were better offered in early trade on Thursday, but conditions remained thin as investors await next week's rates decision, where a slight chance of a cut exists.
A local dealer explained that the supply story persists with another auction today and there was some profit taking activity that led to the better offers.
By 9.00am, the short-term government R154 bond was bid at 7.080 percent from a previous close of 7.000 percent. The medium-term R157 was at 8.295 percent from 8.280 percent, while the long-term R186 was at 8.900 percent from 8.880 percent before.
