The rand was range bound but a tad firmer in noon trade on Thursday, paying scant attention to worse than expected producer price inflation data for July.

Analysts said that although the PPI data was worse than even the most pessimistic of forecasts, it was generally felt that the cycle for interest rate hikes had now peaked and that the next move is likely to be down.

By 12pm the rand was bid at 7.7036 to the dollar from a previous close of 7.7350. It was bid at 11.3815 to the euro from a previous 11.3900 and at 14.1590 against sterling from 14.1860 before.

The euro was bid at US$1.4761 from US$1.4714 overnight, while gold was quoted at $832.25 a troy ounce from $825.50 overnight.

"The rand hasn't really shown any reaction to the PPI data and seems to be trading in ranges for the now," a local currency trader said.

South Africa's producer price index rose by 18.9 percent year-on-year in July from 16.8 percent year-on-year in June, Statistics South Africa (Stats SA) data on Thursday showed.

The PPI rose 2.7 percent on a monthly basis after June's monthly increase of 2.6 percent.

PPI was expected to be at 17.6 percent y/y, a survey by I-Net Bridge found, with forecasts ranging widely from 15.4 percent y/y to 19 percent y/y.

RMB analysts said in their morning report that yesterday's CPIX data - which came in at a record high of 13 percent but was broadly in line with expectations - gives further support to the view that the interest rate cycle has peaked and that the next move in interest rates will be down.

"We are still on for 2Q08 but the market is pricing that January is a done deal," RMB said.

While growing expectations of rate cuts have been devastating for other currencies, notably GBP, NZD and AUD, not so for the rand - at least so far - and probably rightly so, they add.

"Pricing is only for slight rate declines and even with 200bp or 300bp cuts, absolute rates will still remain very high. Nevertheless, the increasing evidence that the cycle has turned is certainly reducing one of the currency's last positives and fits in with our view of seeing another ZAR adjustment some time this year," they added.

Bonds stronger despite high PPI

Bonds were stronger by midday trade on Thursday ignoring the high PPI figures released earlier in the day.

"There is continued buying in the market despite the shocking PPI," a bonds trader said.

By 12.01pm the short-term government R153 bond was at 9.670 percent from its previous close of 9.715 percent. The medium-term R157 was at 9.050 percent from 9.115 percent at the previous close. The long-term R186 was bid at 8.885 percent from its previous close of 8.875 percent.

I-Net Bridge