The rand was mostly unchanged from its overnight levels in the morning session on Thursday, having bounced late yesterday, with the euro coming off against the dollar.

The local currency is likely to be range bound today, ahead of Friday's US payrolls data.

At 09:05 the rand was bid at 7.5036 to the dollar from 7.5137 at its previous close. It was bid at 10.4320 to the euro from its previous close of 10.4582 and was at 11.9372 against the sterling from 11.9676.

The euro was bid at $1.3972 from $1.3895 previously.

A local currency trader said: "The euro came off again yesterday, and the rand bounced later on. However the local currency is only marginally down with a likely range of 7.48-7.58 against the dollar. The big news is tomorrow with US payrolls data."

RMB analysts noted in their morning report that December and January trade was characterised by US dollar/rand moves breaking away from Euro/US dollar.

"This puzzle has never been fully explained," said analysts John Cairns and Nema Ramkhelawan.

"Partly it's because the sudden downside in Euro/US dollar from 1.50 to under 1.40 was associated with the Greek fiscal problems and as such reflected a Euro rather than a US dollar move.

"Given the reattachment US dollar/rand risks have suddenly risen sharply while those of Euro/rand have fallen. US dollar/rand 7.42 - 7.65 is the immediate range," Cairns and Ramkhelawan said.

While the recovery in South Africa is more fragile than in many of the other commodity-based economies, the appreciation pressure on commodity linked currencies (such as the rand) is a factor in South Africa's medium term monetary policy outlook, RMB said.

"Even if inflation were to rise above the 3 percent-6 percent target range sooner than we expect on account of "exogenous" factors such as electricity tariff increases, other administered tariff hikes or food price inflation, the SARB will in our view be very reluctant to hike rates with a rand at sub -8.00 vs. the US dollar," Cairns and Ramkhelawan said.

"Furthermore, those who still question the directional impact of rate moves on the rand should observe the sharp weakness in the AUD and NOK after the rate decisions," they concluded.

Dow Jones Newswires reported that the euro fell against the dollar and yen in Asia Thursday as weak economic data from New Zealand and Australia added to concerns over the fragility of the global economic recovery, prompting Asian hedge funds to sell riskier assets such as the common currency.

As the European Central Bank is widely expected to maintain its record-low 1.0 percent policy rate at the conclusion of a rate-setting meeting at 1245 GMT, the euro may remain weak for the rest of the day, dealers said.

Likely adding to the short-term downward pressure on the unit, ECB President Jean-Claude Trichet, is expected to say the euro zone's recovery will remain rocky when he meets the press at 1330 GMT, analysts said.

While the common currency was supported overnight by the European Commission's approval of Greece's plan to stabilize its troubled finances, market participants remain skittish due to the possibility of future problems.

The commission's assessment failed to remove such anxiety because "there was no mention of any 'Plan B' should Greece face difficulties in the implementation of the stability program or in its funding program," said David Forrester, foreign exchange strategist at Barclays Capital.

During morning trade Thursday in Tokyo, bleak news from New Zealand and Australia encouraged hedge funds and other short-term players in Asia to sell the risk-sensitive euro, dealers said.

Data showed New Zealand's unemployment rose to a ten-year high at 7.3 percent in the October-December quarter, worse than economists' expectations for 6.8 percent. Meanwhile, retail sales in Australia fell 0.7 percent on-month in December, disappointing expectations for a 0.1 percent rise.

At 04:50 GMT, the euro was down at $1.3887 from $1.3905 late Wednesday in New York.

While players' hesitancy to make big bets before the closely watched US non-farm payrolls report for January Friday may discourage more active euro-selling, automated stop-loss selling orders placed around the common currency's recent low at $1.3851 are a concern, dealers said. If such orders were tripped, that could send the euro as low as $1.3700, possibly weighing it down to around ¥124.00, said Mitsubishi UFJ Trust and Banking's Inoue.

Bonds little changed; eye data

South African bonds were little changed from overnight levels in early trade on Thursday.

Wednesday saw bonds making a firm start, but profit taking set in as the rand lost some ground as the US dollar firmed.

By 09:00 the short-term government R154 bond was bid at 7.320 percent and offered at 7.120 percent after closing at 7.210 percent on Wednesday and the medium-term R157 was at 8.370 percent after closing at 8.360 percent previously. The long-term R186 was bid at 9.180 percent and offered at 9.155 percent from 9.165 percent previously.

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