The rand is trading at R7,06 to the dollar in early trade on Thursday, slightly down from its close on Wednesday.
The rand remained in a range in early trade on Thursday, with PPI the main data to watch. Standard Bank analysts noted that currency markets are uncertain as participants look for meaningful fresh impetus.
At 08:25 local time, the rand was bid at R7.0640/$ from its previous close of R7.0634/$. It was bid at R9.6732/€ from R9.6800/€ before and at R11.2219/£ from R11.2385/£ at its previous close.
The euro was bid at $1.3707 from its previous close of $1.3708.
At last night's FOMC meeting, the Fed indicated that its $600bn in quantitative easing would remain in place.There was no sign of the Fed tightening its accommodative stance. This encouraged US equities and further discouraged dollar bulls. In fact, not even wider European credit spreads have been able to stop the dollar from weakening further to the euro, said Standard Bank.
The weaker dollar, firmer commodity prices and the lack of global risk aversion has prevented extended rand weakness, but every time the rand recovers, local importers take cover.
RMB noted that despite repeated attempts to break upwards, USD/ZAR held at 7.10 yesterday leaving us in the 7.00-7.10 range.
"This apparent stability hides the underperformance of the ZAR though - given rising commodity and equity prices and the weak USD, global fundamentals would suggest that USD/ZAR should now be trading closer to 6.80," its analysts said.
Renewed foreign selling of local bonds and the ongoing talk of SARB intervention offers the explanation for the underperformance and neither seems to be abating.
"Risks then are still to the upside but unless we can break higher soon, the mood will switch the other way."
SA's producer price index (PPI) is expected to have dipped at 5.9% year on year (y/y) in December from the 6.2% y/y seen in November, a survey by I-Net Bridge has found. Forecasts among seven leading economists surveyed ranged from 5.6% y/y to 6.6% y/y. The data will be released at 11:30.
Meanwhile, Dow Jones Newswires reports that the euro is marginally lower against the dollar in a tight range and the pair is struggling to hold above 1.3700, Barclays Capital said in a research note. Barclays said the euro's recent rally "is looking a little tired" and it could fall modestly. But they add, "the overall upward trend would stay intact, as long as euro remains above $1.35."
Sydney-based NAB Chief Foreign Exchange Strategist John Kyriakopolous said: "We don't expect (an economic recovery) will be fast enough to produce much of a dent in the high unemployment rate. As such, the risk is that the Fed keeps rates steady all through 2011, providing a headwind for the US dollar," he said.
The Fed kept interest rates unchanged at their near-zero percent level, and said it will see its controversial $600 billion bond-purchasing plan through to completion in June. That stance, while in line with expectations, did telegraph to market participants that any US interest rate hikes would take a while longer.
