South Africa's rand recovered some of its footing against the dollar on Monday after plunging to a 13-1/2 year low last week, although weak domestic fundamentals are likely to keep investors' appetite for local assets subdued.
The currency received a fillip after ratings agency Fitch held off downgrading Africa's most advanced economy, as some investors had feared.
At 0703 GMT the rand was trading at 12.6050 to the greenback, up 0.12 percent from its close in New York on Friday.
It had fallen to 12.6600 on Friday, its weakest since Dec. 2001 as investors fretted that Fitch could move South Africa's rating closer to junk.
In the event, the ratings agency affirmed its BBB rating with a negative outlook, although it warned that an inadequate and unstable electricity supply had led it to cut economic growth forecasts for this year and the next.
"The fact that Fitch refrained from downgrading South Africa's sovereign rating should ensure that the rand enjoys some short-covering at the week's outset," Barclays Africa said in a note.
"Hence, we think that Friday's rand weakness is overdone in the short term and consequently we are happy in sticking with our second quarter end-of-period target of 12.40/dollar for the time being."
The rand has shed nearly 9 per cent against the dollar this year, partly due to investors dumping riskier emerging markets in anticipation of interest rates rising in the United States.
South African government bonds were slightly weaker in early Monday trade, and the yield for the benchmark instrument due in 2026 edged up 1.5 basis points to 8.435 percent.