Despite a slightly softer rand in the morning session on Thursday, the local currency saw lots of damage done overnight, with weakness of its own creeping in on the crosses following comments by the Finance Minister on the currency's strength and amid a weaker euro.

At 9.00am the rand was bid at 7.8220 to the dollar from 7.8385 at its previous close. It was bid at 11.5135 to the euro from its previous close of 11.5332 and was at 12.8155 against sterling from 12.8418.

The euro was bid at $1.4707 from $1.4720 overnight.

A local trader said: "It has been a case of much of the same over the past few days, a weaker euro, and Dow contributing to rand weakness. The local currency has started to pick up weakness of its own if you look at the crosses, following the Finance Minister's comments earlier in the week.

"There is a lot of data out today and we will continue to track the dollar. Further weakness from the euro might see us push above eight, but for now we will test 7.88 against the dollar, and then 94," the trader said.

RMB analysts John Cairns and Nema Ramkhelawan said that the rand bears chased US dollar/rand wildly yesterday with the local unit fleeing to around 7.85/87.

"Fears over the sustainability of the global recovery spurred by poor US housing data dampened the spirit of investors who continued to withdraw from riskier markets and take profit on recent gains.

"US dollar/rand maintained its upward bias amid renewed risk aversion and comments by the Finance Minister relating the recent strength of the rand and the 'immense challenges' it poses to many sectors within the economy, the analysts said.

"Importantly, the Minister emphasised that National Treasury would assist the SARB in building foreign exchange reserves but stressed that they would not intervene directly in order to weaken the rand. This did not appear to deter the rand's descent. Having broken US dollar/rand 7.60, the local unit looks set to sustain a weakening trend and has the potential to again test 7.85/87 given the depressed gold price, lacklustre equities and expectations of a larger- than-expected decline in local trade figures due on Friday," Cairns and Ramkhelawan said.

"Markets are firmly focused on the outcome of 3Q09 US GDP today. The Reuters consensus forecast estimates a 3.1 percent q/q annualised increase in GDP, though the forecasts range from 1.5 percent to 5.2 percent. While there is considerable debate over the extent to which growth rebounded last quarter, it is clear that the US economy emerged from the depths of recession through a sturdy increase in consumption and modest rise in investment spending.

"A disappointing number could prompt further risk aversion and provide the impetus for further rand losses," the analysts concluded.

Dow Jones Newswires reported that the euro logged fresh two-week lows against the yen and the dollar in Asia on Thursday, as weakness in commodity and share prices prompted investors to sell higher-yielding but riskier currencies.

The euro could fall further if commodities prices decline, suggesting the worsening of global economic conditions and boosting the allure of safe currencies such as the yen and the dollar, dealers said.

Also, if results of US gross domestic product data for the July-September period due at 12:30 GMT disappoint, causing US stock prices to fall even lower, the euro could drop further, dealers said.

"We'd better prepare in case (US) GDP results turn out weaker than expectations," as risk aversion dominates the market, said Keiichi Iguchi, a senior dealer at Resona Bank.

The US economy is expected to have grown 3.2 percent on an annualised basis during July-September, according to a Dow Jones Newswires poll of economists, marking the first growth in five quarters. It contracted an annualised 0.7 percent in the previous quarter.

Data boosts bonds

Bonds gained six basis points on Thursday morning on the back of a very weak credit extension number and consequent hopes that interest rates may be cut one more time.

By 8.35am, the short-term government R154 bond was bid at 7.235 percent from a previous close of 7.220 percent. The medium-term R157 was at 8.560 percent from 8.620 percent, while the long-term R186 was bid at 9.165 percent from 9.205 percent.