The rand was stuck in ranges in Wednesday afternoon trade after the release of UK GDP data that indicated that the country had fallen into recession, a trader said.
The data, released this afternoon, revealed that he UK economy shrank in the first three months of the year, after also contracting in the fourth quarter 2011. A recession is defined as two consecutive quarters of economic contraction.
"There was caution after the release of the UK data, which impacted negatively on the rand. The rand seems to be stuck in the same range ahead of the outcome of the US Federal Open Market Committee later this evening," the trader said.
At 15:50 local time the rand was bid at R7.7611 to the dollar from its previous close of R7.7795. It was bid at R10.2554 to the euro from R10.2588 before, and at R12.5037 against sterling from R12.5484 previously.
The euro was bid at US$1.3222 from its previous close of $1.3197.
RMB analysts said in their morning report that from the worries of Monday, the rand had strengthened, pushing below the key support to test the R7.70s.
"With yesterday's move, the rand has outperformed its compatriot currencies, presumably reflecting the on-going strong bond inflows: another R2.2bn yesterday, taking it up to R13bn since last Tuesday. Either the bond index reweighting is causing some real money flows or it's causing some very aggressive speculation," they said.
They also noted that global sentiment was better given the ability of the Netherlands, Italy and Spain to auction debt yesterday, calming fears over Europe, while Wall Street was lifted overnight by continued good corporate earnings announcements that offset uninspiring economic data.
Dow Jones summed the European situation reporting that sterling fell sharply during European trading hours on Wednesday after data showed the UK economy was back in recession.
Sterling sank against both the dollar and the euro after official data revealed the UK economy shrank 0.2 percent on the quarter in the first quarter of 2012 after contracting 0.3 percent in the final three months of last year.
The poor gross domestic product data put an end to sterling's recent rally, which had seen the pound trade at its strongest against the dollar since early September and at a 20-month high against the euro.
"Despite the sterling selloff, some currency traders and strategists remained upbeat about the pound's prospects, emphasising that the GDP reading is backward-looking," Dow Jones reported.
Elsewhere, the euro attempted to climb toward $1.3250 after Germany forecast its economy would grow 0.7 percent in 2012 and 1.6 percent in 2013, but the currency was unable to sustain its gains.
Bonds mixed in quiet trade
Bonds were mixed in late afternoon trade on Wednesday. The R207s and R186s displayed a weaker bias, while the benchmark R157s were a tad firmer.
At 15:50, the benchmark R157 bond was at 6.485 percent from its previous close of 6.480 percent. The R207 was bid at 7.560 percent and offered at 7.555 percent from its previous close of 7.550 percent and the R186 was trading at 8.170 percent from its close of 8.150 percent.