Softer rand tracks firmer USD

Johannesburg - A weaker rand tracked a firmer US dollar in the midday session on Thursday, however the local currency remained range bound ahead of US non-farm payrolls data on Friday.

At 11:39 the rand was bid at R7.5448 to the dollar from R7.5137 at its previous close. It was bid at R10.4601 to the euro from its previous close of R10.4582 and was at R11.9804 against the sterling from R11.9676.

The euro was bid at $1.3839 from $1.3895 previously.

A local currency trader said: "The dollar has firmed, but the rand continued to be range bound at R7.51-61 against the dollar ahead of non farms tomorrow."

RMB analysts noted in their morning report that while the recovery in South Africa is more fragile than in many of the other commodity-based economies, the appreciation pressure on commodity linked currencies (such as the rand) is a factor in South Africa's medium term monetary policy outlook.

"Even if inflation were to rise above the 3%-6% target range sooner than we expect on account of "exogenous" factors such as electricity tariff increases, other administered tariff hikes or food price inflation, the Sarb will in our view be very reluctant to hike rates with a rand at sub-R8.00 vs. the US dollar," RMB said.

"Furthermore, those who still question the directional impact of rate moves on the rand should observe the sharp weakness in the AUD and NOK after the rate decisions," RMB concluded.

Dow Jones Newswires reported that in the European foreign exchanges, the dollar was mixed after rallying Wednesday on a better-than-expected US Automatic Data Processing jobs report. Traders said the focus in the currency markets remained squarely on Friday's US nonfarm payrolls data.

At 09:10 GMT, the euro was trading at $1.3834, down from $1.3893 late in New York on Wednesday after hitting a fresh seven-month low at $1.3831. But the dollar was lower at ¥90.80, down from ¥90.98.

- I-Net Bridge