The rand remained on the back foot in midday trade on Monday after being knocked by disappointing economic data on Friday but was off the morning's worst levels as the dollar slipped on concerns over the impact Hurricane Gustav is likely to have on oil prices.

Analysts say one potential positive for the local unit is the talk of Nigeria's Globacom taking over Telkom. Business Day reported on Monday that Nigerian entrepreneur Mike Adenuga Jnr has submitted a proposal to take over Telkom so he can merge his cellular operator, Globacom, with Telkom's 50 percent stake in Vodacom.

By 11.50am the rand was bid at 7.7033 to the dollar from a previous close of 7.6764. It was bid at 11.2817 to the euro from a previous 11.2875 and at 13.9005 against sterling from 13.9188 before.

The euro was bid at US$1.4643 from US$1.4699 overnight, while gold was quoted at $830.60 a troy ounce from $829.80 overnight.

RMB analysts said in their morning report that the rand starts off the week on the back foot, Friday's inflation gauge in the US PCE data having caused a downward shift in EUR/USD - although crucially not through the 1.4600 level.

"Poor local trade data also didn't help," the analysts added. "USD/ZAR then biased for 7.75 but looking sideways thereafter reflecting that the US is on holiday. But conditions will hot up through the week. Tuesday we have ISM data from the US. Thursday we have the release of the SARB quarterly bulletin where we look for a slightly worse than consensus 2Q08 7.9 percent current account deficit," they stated.

"We also get the local August reserve figures. Expect a decent increase reflecting accumulation early in the month during USD/ZAR's dip to 7.18. Overall, an increasingly busy week. 7.65 — 7.85 still the immediate range, which itself is in the middle of the broader 7.40/50 — 8.00 range. One potential positive for the local unit is the talk of Nigeria's Globacom taking over Telkom," RMB added.

With US markets closed on Monday for the Labour Day holiday analysts expect the rand to trade mostly sideways.

Dow Jones Newswires reports that the dollar is lower in places in Europe Monday on continued concern over the impact Hurricane Gustav will have on the price of crude oil.

The pound, meanwhile, has dived on speculation over an early cut in UK interest rates after Chancellor of the Exchequer Alistair Darling warned that the country could be facing "arguably the worst" slowdown in 60 years.

At the same time, the euro got little help from the latest euro-zone data, which suggest that risks of a recession remain.

As Hurricane Gustav headed for the coast of Louisiana, the price of crude futures on the New York Mercantile Exchange pushed up as high as $118.60 a barrel. But, the price soon backed down again as Gustav was downgraded to a category three from a category four storm as it rampaged around the oil installations in the Gulf of Mexico.

Although it may take some time to discover the extent of any damage to the installations, Gustav isn't likely to have caused as much havoc as the category five Hurricane Katrina back in 2005.

R153 sells off a tad on book squaring

Shorter-dated bonds came in for some selling pressure during the morning session on Monday by investors looking to square their books. However, as a whole the market was trading in a tight range, with the "real money" preferring the sidelines for the time being.

By 11.46am the short-term government R153 bond was at 9.860 percent from its previous close of 9.770 percent. The medium-term R157 was bid at 9.210 percent from 9.160 percent at the previous close. The long-term R186 was bid at 8.980 percent from its previous close of 8.915 percent.

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