Johannesburg - The rand stumbled towards R8 to the dollar yesterday, but dealers did not read too much into the move as liquidity was low.
"Volumes are very thin and so everything is player driven right now and the moves are exaggerated," said one London trader.
"If we close above R7.80 a dollar we should target R8 a dollar."
Companies bought dollars to pay for imports, betting the rand's rally has ended. By 5pm yesterday, dollar orders out of New York had pushed the rand to R7.8926 from late Friday's R7.76.
"There was a lot of importer demand this morning at around R7.60," said Natheem Alexander of Abvest Associates.
All eyes today will be focused on April's consumer inflation data, which should shed further light on the central bank's plans for interest rates.
Analysts polled by Reuters forecast the central bank's targeted CPIX inflation measure, which excludes home loans, would subside to 10.4 percent year on year from 11.2 percent in March.
That would still be far outside its 3 percent to 6 percent target range so the central bank could take a cautious approach, but most economists still expect a cut of 100 basis points when its monetary policy committee meets next month.
"We expect consumer inflation to continue falling sharply," said Merrill Lynch economist Nazmeera Moola in a report.
"By year-end we will have CPIX at 4.8 percent."
Adriaan Mocke, a fixed-income analyst at Investec, said bond prices were discounting lower inflation and lower rates.
Mocke recommended buying the R194 bond. It has earned investors 9 percent this year and is poised to extend gains when the central bank starts cutting rates. Yesterday it rallied 2 basis points to 9.89 percent.
Other bonds were mixed, with yields not expected to move much ahead of the release of the data. The yield on the R150 firmed 3 basis points to 10.62 percent, while the R153 weakened 1 basis point to 9.93 percent.
The euro surged above $1.17 yesterday, exceeding its January 1999 launch level after US treasury secretary John Snow indicated he was comfortable with the dollar's recent weakness.
The euro rose to $1.1720 in late morning deals in Europe from $1.1581 on Friday in New York.
This beat the $1.1665 valuation at which the euro was fixed on December 31 1998 ahead of its debut. The euro opened at $1.1747 on the first day of trade, four days later.
Yesterday the dollar tumbled to ¥115.13 from ¥115.90 on Friday.
Analysts said the latest dollar losses were triggered by Snow's remarks in France, where he said recent currency fluctuations had been "really fairly modest".
Snow reiterated his support for a strong dollar policy, which the US has articulated since 1995, but also said the market value of the currency was only one element of this.
Barclays Capital currency strategist Jane Foley said Snow's remarks, which follow a series of similar comments, had "dealt the dollar a hefty blow".
"He has had several occasions on which to reassert the strong dollar policy, and he has failed to do so each time," Foley said.
"Unless the US starts paying serious lip service to the strong dollar policy, it is going to fall some more."
While Snow's comments have been seen as the main driver of the recent slide, economists said a host of factors were responsible for the trend.
Paul Mackel, an economist at Dresdner Kleinwort Wasserstein, said recent US economic data suggested that the US Federal Reserve might cut interest rates again in June. "We're looking for another 50 basis point rate cut and that in itself undermines the dollar," he said.