The rand remained strong against major currencies, bolstered by improved global sentiment and carry trade, but was off the morning's best levels in quiet midday trade on Tuesday.

With only two days of trade this week sandwiched between two long weekends many players are off for the week.

By 11.40am the rand was bid at 7.5635 to the dollar from a previous close of 7.5120. It was bid at 11.7649 to the euro from a previous 11.7616 and at 14.9756 against sterling from 14.9399 before.

The euro was bid at US$1.5569 from $1.5652 overnight, while gold was quoted at $886.75 a troy ounce from $892.60 overnight.

"The rand continues to strengthen sharply. The euro-rand made the running on Friday with a break of the 12.00 level, but we come into this morning's trade with USD/ZAR now also down," say market analysts.

"Increasingly it seems that with the sharp Q1 sell-off and with the high and improving carry, the rand will continue to surge as long as international conditions remain positive," they add.

The range for today has been pegged at 7.48 — 7.60 to the dollar by the analysts.

Meanwhile, Dow Jones Newswires reports that hopes that the Federal Reserve will make some hawkish comments after Wednesday's policy meeting is helping to keep the dollar higher against most other majors in Europe Tuesday.

A rise in risk appetite to its highest level in seven months could also be lending some support.

But the dollar's gains could be reversed by disappointing US data later in the day, as well as by the continued bid tone for crude oil.

The currency market is being characterized by low liquidity as Japan is on holiday and many participants appear reluctant to do much ahead of the Fed meeting.

The Fed is widely expected to cut rates by 25 basis points. The big question is whether it will take this opportunity to suggest that the recent steady decline in US interest rates is on hold.

Sentiment bearish as curve inverts

Despite a still-strong rand, South African bonds gave back further ground during the morning on Tuesday as the bears dictated overall direction. A dealer explained that medium- to longer-term sentiment remained negative, with the rand also expected to start losing ground again.

By 11.56am the short-term government R153 bond was at 10.305 percent from its previous close of 10.250 percent, while the medium-term R157 was at 9.460 percent from 9.420 percent at its previous close. The longer-term R186 bond was bid at 9.315 percent from its previous close of 9.260 percent.

I-Net Bridge