Johannesburg - South Africa's rand climbed nearly 1 percent against the dollar on Wednesday, retracing from what were considered oversold levels last week, although concerns about the ailing economy are likely to cap significant gains.
At 06h50 GMT, the local unit was trading 0.84 percent firmer at 12.3400 to the dollar, propelled mainly by short covering after rand bears pushed it to a 13-1/2 year low of 12.6600 last week.
“With the rand back below 12.50, technically it seems on a slightly better footing and it may well approach the 12.00-12.25 range in the near term,” Standard Bank said in a note.
“This may support longer-dated local rates, too. However, our overall bias still lies to rand weakness into the third quarter of 2015.”
Government bonds were flat in early trade, with the yield for paper maturing in 2026 unchanged from Tuesday's close of 8.34 percent.
Traders said the local currency could come under renewed pressure if mining and factory output data come out weaker-than-expected on Thursday, underpinning the problems facing Africa's most developed but ailing economy.
The rand has fallen about 7 percent against the dollar this year, as investors dump local assets in the face of chronic budget and current account deficits and the worst electricity crunch in seven years.
Reuters