The rand was trading in a relatively narrow range in noon trade on Thursday as market players await the European Central Bank rate decision due shortly and US jobs data later today.

The market will also be keeping a close eye on global markets for some direction after a weak finish on Wall Street overnight amid rising risk aversion.

By 11.50am the rand was bid at 7.8440 to the dollar from a previous close of 7.8391. It was bid at 12.4606 to the euro from a previous 12.4526 and at 15.5753 against sterling from 15.6329 before.

The euro was bid at US$1.5876 from US$1.5890 overnight, while gold was quoted at $940.55 a troy ounce from $944.85 overnight.

RMB analysts said in their morning report that fresh falls overnight imply the Dow is now down more than 20 percent since its high and so meets the arbitrary definition of a bear market.

The Dow ended down 1.46 percent, the Nasdaq fell 2.32 percent and the S&P500 shed 1.82 percent.

"USD/ZAR divergence from this trend continues though, in trade reminiscent of what we saw in October last year. The explanation here is obviously the weakness in the USD, where the Fed's dual mandate of focusing on growth and inflation is at sharp contrast to other central banks' exclusive focus on inflation," they said.

"Indeed, today's first big event will almost certainly see the ECB hike rates 25bp to 4.25 percent. Focus is on what they will do beyond this - some ECB officials have stated that this isn't the start of a new tightening cycle, but signals are mixed and the market is thinking they will do another 25bp later this year," they said.

They added a break of $1.6018 would open up downside risk on USD/ZAR, just maybe even 7.50 multi-week.

"The ECB will be key here, so too US June employment stats later in the afternoon. Expectations are for 60 000 job losses in the month, an acceleration from 49,000 in May, but some see a sharper decline after weak data earlier this week," they said.

ETM analysts said in their morning report that what makes the current environment especially concerning is the fact that oil prices have continued their march higher despite expectations of a significant economic slowdown which will ensure that central bank officials do not only have slowing economies to contend with, but a deteriorating inflation outlook as well.

Brent crude surged through the $145 per barrel level overnight, touching a high of $145.75. It was last at $145.15.

"Domestically, speculation of a recession has been fuelled by a domestic bank which suggests that the timing of such a recession would be in either Q1 or Q2 2009. ETM appreciates that domestic growth will slow, but does not anticipate a recession amid a huge amount of spending on the upgrading of infrastructure by government," ETM said.

They expect the rand to trade in a 7.78/92 range, with further consolidation likely.

Bonds firm on short covering

Bonds were between 6.5 to eight basis points firmer in late morning trade on Thursday on short covering.

By 11.50am the short-term government R153 bond was at 11.710 percent from its previous close of 11.780 percent, while the medium-term R157 was at 10.690 percent from a previous 10.760 percent. The long-term R186 was bid at 10.430 percent from a previous 10.515 percent.

I-Net Bridge