The rand softened a fraction during the midday session on Tuesday, amid squaring of positions ahead of the MPC meeting 15:00, a local trader said.

At 11.50am the rand was bid at 7.4042 to the dollar from 7.3484 at its previous close. It was bid at 11.0980 to the euro from its previous close of 11.0150 and was at 12.5210 against sterling from 12.3748.

The euro was bid at US$1.4944 from US$1.4966 overnight.

"The rand has weakened a bit against the euro and dollar this morning with oil companies buying dollars," the trader said.

"We are also seeing some squaring of positions ahead of the MPC meeting, in case of an interest rate cut. If no cut is announced as is generally expected, we should see the local currency head back down to the 7.35-36 level against the dollar," he said.

RMB analysts John Cairns and Nema Ramkhelawan noted in a morning report: "We think that rates will be kept on hold, both because economic data is not yet supportive of a cut - notably inflation isn't yet back in the target band - and because the new governor might want to be careful in sending a message that she is soft on inflation.

"We'll get new dates for the December meeting (or possibly a cancellation) and also possibly the dates for 2010," the analysts said.

Earlier, Dow Jones Newswires reported that euro fell slightly against the dollar and yen in Asia Tuesday as weaker regional share markets and apparently dovish statements from the Australian central bank prompted players to cut exposure to riskier, higher-yielding assets such as the euro.

As most major Asian bourses slumped, with Japan's benchmark Nikkei 225 Stock Average down 0.5 percent in early afternoon trade, players sold the risk-sensitive European currency.

Meanwhile, the dollar benefited from a lack of any new statements on the Chinese yuan in a press conference with US President Barack Obama and his Chinese counterpart Hu Jintao following their bilateral meetings in Beijing, dealers said.

Long end remains better bid

Longer-dated bonds were better bid by noon on Tuesday ahead of a key rates decision in the afternoon.

By 11.47am, the short-term government R154 bond was bid at 7.275 percent from a previous close of 7.215 percent. The medium-term R157 was at 8.380 percent from its previous close of 8.370 percent, while the long-term R186 was bid at 8.945 percent from 9.030 percent, reflecting expected strength.