The rand clawed back some lost ground yesterday as the dollar retreated against European currencies, after news that growth in the US economy in the fourth quarter was weaker than expected.
But the local unit made no mileage out of news that the country's main inflation rate subsided to a record low of 3.1 percent in February.
Dealers said near-term direction was clouded ahead of key US jobs data tomorrow, which would drive the greenback.
At 5pm the rand was bid at R6.262 a dollar, 8.35c firmer than on Tuesday and well off a five-month low of R6.38 a dollar touched on Monday.
But that move was mainly driven by the dollar's retreat against the euro and other major currencies, after a week-long rally fuelled by perceptions that US interest rates might be hiked more aggressively this year.
This allowed the euro to firm 0.46c to $1.2959. The rand often tracks the euro, as it is the currency of South Africa's main trade partner.
"There has been a little bit of indecision as to whether it's going to follow through" on this week's weaker trend, a senior dealer said earlier yesterday.
"If we close below R6.31 a dollar we are likely to head back to R6.25 or R6.20. But the medium-term picture will not change unless the rand goes below those levels."
The dollar's pullback was sparked largely by confirmation that the US economy grew by 3.8 percent in the fourth quarter of 2004, down from 4 percent in the third quarter.
The data also showed that the price deflator, a key inflation measure, rose to 2.3 percent in the period, above expectations for a flat reading of 2.1 percent.
News that consumer price inflation excluding mortgages plunged to the bottom of the 3 percent to 6 percent target range in February had no market impact.
This was because rising global oil prices and a weaker rand are likely to put upward pressure on inflation, making more interest rate cuts unlikely.
Today's producer price data for February, along with money supply, credit, trade and jobs figures, will provide further clues to the inflation outlook.
Government bonds perked up in line with the rand.
The yield on the benchmark R153 bond rallied 4 basis points to 8.3 percent. The yield on the R194 bond was 6 basis points stronger at 7.96 percent.