The rand was firmer against major currencies in late trade on Friday ahead of the long weekend – particularly against the euro which remained under pressure against the US dollar.

By 3.40pm the rand was bid at 7.5760 to the dollar from a previous close of 7.6830. It was bid at 11.8752 to the euro from a previous 12.0520 and at 15.0838 against sterling from 15.1704 before.

The euro was bid at US$1.5622 from $1.5681 overnight, while gold was quoted at $895.80 a troy ounce from $888.00 overnight.

Traders said the euro-rand play was the dominant feature of the day, but cautioned that wild swings were still possible.

Dow Jones Newswires reports that the dollar advanced against key rivals Friday on the recalibrated expectation that the Federal Reserve won't continue to sacrifice the greenback's yield after the next monetary policy meeting.

Currency traders have found favour with the buck on the new view that the Fed's interest rate easing will come to a halt after another 25-basis-point reduction next Wednesday - also less of a cut than previously predicted. That is supporting the dollar's outlook, especially versus the higher-yielding euro, on the expectation that the interest rate differential between the two regions will not continue to expand - and the hope that it may even soon narrow.

The euro fell to a three-week low of $1.5555 and the dollar gained to almost a two-month high against the yen of Y104.82. The advances began Thursday after a Wall Street Journal article suggested the Fed would pause after April, combined with weak euro zone data and more direct language on foreign exchange volatility from European Central Bank President Jean Claude Trichet.

"Global financial markets are witnessing a sharp reversal of the flight-to-quality trade on the view that further financial sector losses are manageable and that the U.S. real sector downturn may not be quite as deep as first feared. Supporting this view over coming days will be US tax rebates hitting taxpayers' bank accounts next week and the sense that Wednesday's (Federal Open Market Committee) statement may in some way signal a pause in the easing cycle," said Chris Turner, head of foreign exchange strategy research at ING Wholesale Banking in London.

MPC rumours hit the short end

Short-term bonds lost significant ground in the afternoon on Friday after talk arose that central bank governor Tito Mboweni may call an emergency MPC meeting due to increased inflation risks.

By 4.50pm the short-term government R153 bond was at 10.265 percent from its previous close of 10.250 percent, while the medium-term R157 was at 9.410 percent from 9.435 percent at its previous close. The longer-term R186 bond was at 9.230 percent from its previous close of 9.265 percent.

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