The rand continued to weaken against the US dollar in late afternoon trade on Friday as the unit battled to withstand reserve accumulation by the SA Reserve Bank (Sarb).

"It's reserve accumulation as well as portfolio outflows - and even though Eskom says it will repatriate the money from its bond issue, we suspect this will be directly absorbed at the Sarb, so it's likely to have limited influence in the spot market," said Michael Keenan, head of Forex Research at Standard Bank.

He said the rand had disengaged from the euro.

In late afternoon trade, the rand was bid at R7.1161/$ from R7.0631/$ at its previous close. It was bid at 9.6220 to the euro from 9.5206 before and at 11.3348 against sterling from 11.2322 at its previous close.

The euro was bid at $1.3528 from its close before of $1.3466.

Keenan said that that those who were bearish on the rand would "lock in a few profits" and that the underlying mood for the unit was negative.

He said the Sarb's Monetary Policy Committee had said on Thursday that the central bank would continue to accumulate reserves.
"They don't normally use those words so explicitly and I'm sure the data will show it when it comes out on February 7," he said.

Foreigners dumped local bonds and stocks after the Sarb signalled an end to its monetary loosening cycle.

The Sarb's decision to leave its repo rate unchanged at 5.5% was largely expected after reducing rates by 650 basis points since late 2008, but it probably disappointed foreign investors who had still bet on the off-chance of one more rate cut.

"Another cut would have been positive for the bond market and the equity market but with that not materialising I think we've seen a bit of scaling down on South African assets by foreigners," said Bidvest Bank chief dealer Ion de Vleeschauwer.

"Those amounts that have been flowing in have been large and if they start leaving, the rand is going to feel a bit of pressure. That's why the rand is looking a bit bleak and I expect that to be with us in the short term."

The rand has gained about 26% against the dollar in the last 24 months, largely buoyed by portfolio flows, but shed more than 1.4% to R7.113/$ on Thursday, its weakesst level since November 30.

Meanwhile, on Friday Dow Jones Newswires reported that the euro continued to climb in European trading hours on Friday, bolstered by positive German business data and comments from Eurogroup head Jean-Claude Juncker that a solution to the euro-zone debt crisis was only weeks away.

Juncker's comments set an upbeat tone, as he vowed to "speed up our preparatory work towards a comprehensive package" that could help ease long-running euro-area debt stresses.

Few believe that the debt crisis is close to a permanent resolution. But official reserve managers have ensured the euro's resilience regardless, market watchers said.

"The euro is going up by default, not on merit," said Neil Mellor, currencies analyst at Bank of New York Mellon in London.

"The uptrend in the euro against the dollar from the January low has been pretty unrelenting, especially now we have broken through the congestion zone at $1.35," said Daragh Maher, senior currency strategist at Credit Agricole.

The surprise increase in the German Ifo business sentiment survey also provided the euro with support. Its headline index for January hit a multi-year high of 110.3, slightly better than the 110.0 forecast, drawing on a renewed surge of optimism among German exporters. The previous reading was revised to 109.8.