The South African rand reached its strongest level in two months against the dollar on Tuesday, although traders were expecting underlying caution to prevail ahead of Finance Minister Pravin Gordhan’s Wednesday budget speech.
Stocks opened lower, with the JSE Top-40 blue-chip index easing 0.3 percent.
At 0724 GMT, the rand traded at 15.2450 versus the dollar, off Monday’s New York close at 15.1950.
The rand had briefly scaled 15.1620 earlier in Tuesday’s session, the firmest it has been against the dollar since late December, according to Thomson Reuters data.
The rand has been buoyed by a global return to high yielding assets due to a bounce in oil and commodity prices, although the rally appeared to be stuttering on Tuesday.
Technicals suggested the rand still had more upside, traders and analysts said.
“The rand is still following its corrective phase nicely,” Standard Bank’s Warrick Butler said.
“The break below 15.65 has yielded 50 cents and there is every chance that it will extent this run to at least the next support level of 14.85.”
Sustained gains would also depend on whether Gordhan could reassure investors in his budget speech that South Africa’s prudent fiscal policy remained intact. Investors have been nervous since President Jacob Zuma inexplicably changed finance ministers twice in less than a week in December, sending the rand tumbling about 10 percent.
Government bonds edged lower on Tuesday, with debt maturing in 2026 adding 1 basis point to 9.205 percent.