The rand remained on the back foot but was off the day's worst levels in late trade on Thursday after a worse than expected producer inflation figure for March following Wednesday's poor CPIX number which have raised the spectre of further interest rate hikes on the local front.

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

By 3.50pm the rand was bid at 7.6936 to the dollar from a previous close of 7.6270. It was bid at 12.1047 to the euro from a previous 12.1828 and at 15.1887 against sterling from 15.1563 before.

The euro was bid at US$1.5706 from $1.5883 overnight, while gold was quoted at $892.83 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 off their worst; eye rand

Bonds recovered off their worst levels during the afternoon on Thursday as the rand pulled back a tad, and a dealer described the initial move weaker as "overdone".

"Yields have come back a bit in the afternoon – I think it was a bit overdone," said a senior Johannesburg-based bond dealer.

"We were forced higher after the inflation data and as the rand fell out of bed and a lot of people were taken out of stock, with no offers coming on the follow," he explained.

"Funds then stepped in to buy and banks vacuumed the rest," he added.

"We then also followed the rand lower (stronger)," concluded the dealer.

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 4.22pm the short-term government R153 bond was at 10.265 percent from 10.185 percent at its previous close and 10.310 percent prior to the PPI data, while the medium-term R157 was at 9.440 percent from 9.400 percent at its previous close and 9.480 percent earlier. The longer-term R186 bond was at 9.320 percent from its previous close of 9.220 percent.

The rand was last bid at 7.6965 per dollar from its overnight close of 7.6270, but off worst intraday levels of 7.7900.

Consumer prices scaled double digits for the first time in five years, according to data on Wednesday.

I-Net Bridge