The rand was a fraction firmer in the morning session on Tuesday, tracking the euro against the dollar as it neared the $1.50 mark.

At 8.58am the rand was bid at 7.2980 to the dollar from 7.2984 at its previous close. It was bid at 10.9278 to the euro from its previous close of 10.9385 and was at 11.9830 against sterling from 11.9989.

The euro was bid at $1.4983 from $1.4965 overnight.

A local trader said: "We are tracking the euro against the dollar, which is nearing the $1.50 mark. If we break that the rand could go lower, to 7.18 against the dollar, but the break needs to be convincing. Failure to do that and we should see the rand back in ranges."

RMB analysts John Cairns and Nema Ramkhelawan said: "Euro/US dollar is flourishing above 1.49 this morning and remains within touching distance of 1.50. A move beyond this level could provide some impetus to a seemingly lacklustre rand and might encourage the local unit to deviate from the safety of its narrow trading range.

"US dollar/rand continues to gyrate around the 7.30 level despite a broadly weaker US dollar and, barring any phenomenal movements in euro/US dollar (which might be restricted by options-related trade), should continue to cling to its range today," they said

"Event risk is thinly spread across the week. Data releases are mainly focused in the US with housing starts figures and PPI due today. The data should be broadly in line with expectations and is unlikely to jar the market. Having boosted US equities to fresh 12-month highs, corporate earnings results will continue to take centre stage and provide encouragement to investors seeking confirmation of a global recovery," the analysts continued.

"Meanwhile, a battered US dollar continues to heighten the appeal of commodities, most notably precious metals and crude oil. Though the price of oil continues to climb, largely on speculation that a global recovery will induce higher demand, there is little in the way of fundamental support.

Similarly, the ascent of the gold price to record highs is mainly attributed to the weaker US dollar, which makes the price of bullion cheaper for holders of other currencies. A turnaround in the US dollar could trigger a sharp adjustment in the price of alternate assets such as commodities, though this seems unlikely given the market view that US interest rates will remain at low levels well into 2010," Cairns and Ramkhelawan concluded.

Dow Jones Newswire reports that the euro nearly touched the psychologically important US$1.50 mark in Asia on Tuesday as falling US interest rates prompted market participants to sell the greenback, while firm regional share prices encouraged them to buy the common currency instead.

The euro rose to $1.4994, its highest level since August last year. Dealers in Tokyo said it is just a matter of time until the single unit breaches above $1.50.

"It's clear the dollar will remain weak for now," said Hideki Amikura, a senior dealer at Nomura Trust and Banking. "You have a view that the Federal Reserve can't hike rates for now to support the sluggish economic recovery on one hand, and increasing risk appetite on the back of rising asset prices and hawkish comments from some central banks on the other."

Bonds in very quiet market

Bonds were slightly softer in extremely quiet early trade on Tuesday, as players await the weekly government bond auction later in the morning and the key Reserve Bank interest rate decision on Thursday afternoon.

By 8.50am, the short-term government R154 bond was bid at 7.575 percent from a previous close of 7.530 percent. The medium-term R157 was at 8.585 percent from 8.565 percent, while the long-term R186 was bid at 9.225 percent from 9.195 percent.

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