Johannesburg - South Africa's rand extended its recovery early on Wednesday along with fellow emerging markets after Chinese authorities cut interest rates to support its wavering economy.
By 06h30 GMT the rand had firmed 0.75 percent to 13.0955 per dollar, shrugging off a second-quarter contraction in gross domestic product to reach an overnight high of 12.9810 before retreating slightly.
“Although yesterday's foray below the 13.00 level was as expected, it met with significant dollar demand, and this is likely to remain the case in the short term,” said Oliver Alwar, a trader with Standard Bank.
South Africa's economy contracted by 1.3 percent, for the first time in more than a year, with mining and manufacturing sectors particularly feeling the pinch of local constraints and soft demand in the global economy.
While the move by China's central bank to cut interest rates for the second time in two months supported the rand, analysts said underlying weaknesses in the economy would continue to strain the currency.
South Africa's worst electricity crisis in years has held back economic activity, weighed down consumer and business confidence, while trade and budget deficits remain at worryingly elevated levels due to the lack of productivity.
Yields on government bonds were higher in early trade, with the benchmark issue due in 2026 adding 3 basis points to 8.485 percent.
REUTERS