The rand opened softer against the dollar in the morning session on Friday tracking the euro, but stuck within a range.

At 8.55am the rand was bid at 7.3370 to the dollar from 7.2600 at its previous close. It was bid at 10.9192 to the euro from its previous close of 10.8275 and was at 11.9435 against sterling from 11.7915.

The euro was bid at US$1.4902 from US$1.4935 overnight.

A local trader said: "We are a bit weaker this morning tracking the euro, which has come off a bit, so we could see the rand bounce. We still haven't reached yesterday's highs, and continue to be in ranges at 7.25-7.45 against the dollar."

Said RMB analysts John Cairns and Nema Ramkhelawan in a morning report: "A rampant EUR/USD, rising commodity prices, and a relentless appetite for high- yielding assets set the stage for yet another phenomenal performance by global markets yesterday.

"Having touched 7.23, dollar/rand was on the brink of breaking 7.20 as the USD appeared to continue its slide. But as though it was overcome by stage fright, the market faltered and its performance turned out to be rather ordinary, with dollar/rand closing near 7.28," the analysts said.

"Dollar/rand is taking its lead from euro/dollar at the moment. If it breaches 1.50 and remains above this level, then dollar/rand is likely to break 7.20 and strengthen to 7.18. However, adverse movements in the gold price may stall the US dollar/rand's momentum," the two said.

"Event risk is concentrated in the US once again with the University of Michigan consumer confidence figures due later today. While analysts expect a marginal increase in US consumer confidence, as a result of the rebound in house prices and a slight reduction in the price of gasoline, the sharp decline in US retail sales, published earlier this week, suggests that consumers remain fairly reluctant to spend. Even though consumption growth underlies a large part of the US economic recovery, poor labour market conditions and lower real income are likely to undermine the extent of the rebound in consumption.

"A dreary confidence reading might detract from positive earnings results and prompt investors to consolidate their positions ahead of the weekend, halting emerging-market currency gains," Cairns and Ramkhelawan concluded.

Dow Jones Newswire reports that the yen weakened against the euro and dollar in Asia on Friday as firm Asian equity markets and commodity prices prompted speculators to dump the safe-haven Japanese currency in favour of higher-risk units.

"The recent solid performances seen in the share and commodity markets have prompted carry trades, mainly by speculators. Today's flows are an example of that," said Hideaki Inoue, a senior trader at Mitsubishi UFJ Trust and Banking Corp. Carry trades refer to investors buying currencies with low interest rates and exchanging them for other currencies with higher yields.

Traders said the euro may rise further against both the yen and the dollar if US economic data and corporate earnings come in stronger than expected, increasing risk appetite for high-yielding currencies.

Bonds softer; eye ILB auction

Bonds were softer in early trade on Friday ahead of the inflation linked bond auction later in the morning.

By 8.30am the short-term government R154 bond was bid at 7.635 percent from a previous close of 7.535 percent. The medium-term R157 was at 8.600 percent from 8.560 percent, while the long-term R186 was bid at 9.225 percent from 9.200 percent.