The rand was on the back foot in noon trade on Thursday after a worse than expected producer inflation figure for March which has raised the spectre of further interest rate hikes on the local front.

A softer euro was adding to the rand's weaker tone.

By 12pm the rand was bid at 7.7652 to the dollar from a previous close of 7.6270. It was bid at 12.2377 to the euro from a previous 12.1828 and at 15.3443 against sterling from 15.1563 before.

The euro was bid at US$1.5751 from $1.5883 overnight, while gold was quoted at $901.63 a troy ounce from $903.62 overnight.

"I think players were spooked by the PPI figures this morning. So we're seeing a bit of a blow-off after the figures. But the rand is still in the wide range that we have been predicting," a local currency trader said.

South Africa's producer price index rose by 11.8 percent year-on-year in March from 11.2 percent year-on-year in February, Statistics South Africa (Stats SA) data on Thursday showed.

The PPI rose 2.0 percent on a monthly basis after February's monthly increase of 1.3 percent.

PPI was expected to be at 10.9 percent y/y, a survey by I-Net Bridge has found. Forecasts ranged from 10.1 percent y/y to 11.5 percent y/y, while PPI was at 10.3 percent a year ago, providing a high base.

RMB analysts said in their morning report that the rand whiplashed as USD/ZAR fluctuated wildly in the 7.61-7.69 range yesterday.

This was largely flow-driven but the sharp reversal of EUR/USD from the 1.6000 handle clearly helped prevent ZAR gains from extending.

"The market initially didn't know how to take the higher-than-expected CPIX inflation number - 10.1 percent versus an expected 9.7 percent - but within an hour or so the ZAR was pushing sharply weaker. While this is all mixed up with the general volatile environment, it does suggest that the market takes the growth argument (higher inflation = higher rates = slower growth = less foreign portfolio inflows) as more important than the interest rate differential view," they said.

Bonds weaken further on PPI

Another bad dose of inflation data saw South African bonds weaken further on Thursday as the spectre of another interest rate hike loomed ominously.

PPI for March came in worse than expected on Thursday morning after a disappointing CPIX figure on Wednesday.

Higher interest rates affect bond yields and push them higher due to the supply and demand shortfall that would ensue if they remained the same. They need to adjust higher to remain competitive with other rates. This means prices dip in turn.

Because the market was expecting another bad figure, bond yields were already weakening before the release of the data at 11.30am local time.

By 12pm the short-term government R153 bond was at 10.395 percent from 10.185 percent at its previous close and 10.310 percent prior to the data, while the medium-term R157 was at 9.550 percent from 9.400 percent at its previous close and 9.480 percent earlier. The longer-term R186 bond was bid at 9.345 percent from its previous close of 9.220 percent and 9.315 percent.

I-Net Bridge