South Africa’s rand edged higher against the dollar on Tuesday, pulling away from last week’s 14-year lows, although traders and analysts expected weak domestic fundamentals to cap significant gains.
At 1549 GMT the rand – which fell to a Dec. 2001 low of 12.7700 last week – was trading 0.31% firmer at 12.6485/dollar compared with Monday’s close at 12.6880.
With South Africa’s economic data release calendar looking thin for the week, analysts said investors would focus on Friday US payrolls numbers for further clues on the timing of rate hikes in the world’s biggest economy.
The local currency has shed nearly 10% of its value against the greenback this year, with expectations that US rates will rise this year, drawing investment away from emerging markets.
Investors are also concerned about weak growth in Africa’s most advanced economy, which is best by chronic power shortages and nagging deficits on its budget and current account.
“We’ve had quite a lot of volatility recently and I think people are probably getting a bit fatigued with the long dollar story,” said Dominic Bunning, senior FX strategist at HSBC.
“In EM we still think there’s a little bit more room for the dollar to strengthen but potentially we’re getting towards the end of that trend.”
The rand has also taken a hit from the recent decline in commodity prices and signs of a slowdown in key commodity importer China.
South African government bonds edged higher on Tuesday, and the yield for debt maturing in 2026 eased half a basis point to 8.215%.