The rand remained on the back foot in late trade on Monday as investors shied away from risky assets in the wake of the US's latest financial woes.

By 3.50pm the rand was bid at 8.1387 to the dollar from a previous close of 8.1041. It was bid at 11.5503 to the euro from a previous 11.5846 and at 14.5843 against sterling from 14.5773 before.

The euro was bid at US$1.4214 from US$1.4290 overnight, while gold was quoted at $778.45 a troy ounce from $765.30 overnight.

"The rand is weaker on risk aversion. What we're seeing at the moment is players buying yen and selling rand," a local currency trader said.

A Health Checklist for the rand drawn up by Brait chief economist, Colen Garrow, delivers a verdict that weakness for the rand could persist despite the unit being undervalued.

Risk aversion towards emerging markets, political uncertainty, softer non-resident activity in bonds and equities, inflation and the current account deficit are the major negative pull factors.

Garrow adds to this the view that what remains of exchange controls will be prudential limits, while other negatives include sentiment toward the dollar and weakening commodity prices.

"A slower US, and global economy, suggest less demand for key commodities," explains Garrow.

Dow Jones Newswires reports that the euro is retreating early Monday from a sharp advance overnight against the dollar as currency markets conclude any need for a rate cut from the Federal Reserve will mean the same from the European Central Bank.

The common currency had rallied considerably overnight as the fate of major US banks seemed to unravel, with Lehman Brothers Holdings Inc. filing for Chapter 11 bankruptcy and concerns mounting for American International Group Inc. and Washington Mutual Inc. (WM). However, as currency traders digested the news and the implication it may have on the fed funds rate, it became clear that any need for a cut by the Fed would signify another blow to global growth, exacerbate the euro-zone economic slowdown and lead the ECB to cut rates as well.

The Fed's next scheduled monetary policy meeting is Tuesday. Fed funds futures recently priced in about 50 percent odds of a 25-basis-point rate cut.

The prospect of lower rates usually hurts the dollar against the euro, which currently benefits from a high yield. However, analysts say that interest rate differential may not be sustained much longer. Therefore, plowing money into the euro from the dollar on fears associated with US banks just doesn't make sense.

The dollar's fall has also been calmed Monday in New York by the announcement of liquidity measures from the Fed, ECB, Bank of England, Reserve Bank of Australia and Swiss National Bank.

Bonds hold ground despite credit woes

Bonds pulled off their worst levels during the afternoon on Monday in line with the rand, but a dealer felt the market was still a little uncertain on the impact of the continuing global credit turmoil.

By 3.51pm the short-term government R153 bond was at 9.830 percent from 9.810 percent at the previous close. The medium-term R157 was at 9.130 percent from its previous close of 9.100 percent and the long-term R186 was bid at 8.795 percent from Friday's close of 8.785 percent.

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