Rand still vulnerable against dollar

Johannesburg - The rand weakened against the dollar on Wednesday and is likely to remain under pressure given the uncertainty prevailing in global markets.

Government bonds firmed and focus will be on CPI inflation data at 08:00 GMT. The market is expecting inflation to rise to 5.2% year-on-year.

Should the CPI data come in higher than forecast, bonds are likely to weaken and reverse some of the previous week's sharp gains that have been prompted partly by increasing expectations the Reserve Bank may cut interest rates again.

Yields hit record lows on Tuesday after Reserve Bank Governor Gill Marcus strengthened rate cut hopes by saying the bank would act "appropriately" to counter a significant global slowdown.

The yield on the 2015 bond was down one basis point to 6.50% and that on the 2026 note slipped by the same margin to 7.96%.

Domestic stock futures rose, pointing to a positive start when trading begins at 07:00 GMT. The Top 40 - (Tradeable) [JSE:J200] September futures contract ALSIc1 was up 0.64%.

The rand was trading at R7.2150 to the dollar at 06:40 GMT, 0.6% weaker than Tuesday's New York close of R7.1715. Its losses on the day put it at the bottom of the log of emerging market currencies tracked by Reuters.

The rand has been stuck in ranges this week with most traders looking to US Federal Reserve Chairperson Ben Bernanke's speech on Friday for direction.

"Focus has shifted from fiscal policy and is now on monetary policy. Friday's speech becomes the key event. US stocks rallied on the back of anticipated further monetary stimulus," said a local trader.

Although the rand has recovered from one-year lows of R7.50 hit two weeks ago, it is vulnerable, with charts suggesting it is stuck in a bearish trend as it trades weaker than its short and long term moving averages.

It will have to pierce R7.25 to see further losses, said Jim Bryson, a dealer at Rand Merchant Bank, adding volatility has been heightened by uncertainty about whether Bernanke will announce further stimulus for the ailing US economy.