Rand climbs to 2-week high vs dollar

Johannesburg - The rand rallied to its firmest in two weeks against the dollar on Tuesday as woes in Japan's economy fuelled demand for higher-yielding currencies in emerging markets.

By 16:29 GMT the local unit had climbed 1.04% to 11.0190 per dollar, its strongest level since October 4.

The rand looked set to break below the psychologically significant 11.000 mark for the first time since October 31 but fell just short, after data showing Japan had slid into recession sank the yen to near seven-year lows.

"You can see by today's gains that carry trade has been enough to distract from the (South African) economy's fundamental weaknesses," Sean McCalgan, a market analyst at ETM Analytics, said.

Yields on government bonds were also buoyed by the yen sell-off, with the benchmark paper due in 2026 shedding 3 basis points to 7.82%.

Locally, Wednesday's consumer inflation numbers are not expected to surprise, while the central bank's interest rate decision on Thursday will be keenly watched as it is newly appointed Lesetja Kganyago's first policy meeting as governor.

"There are expectations that the hawkish rhetoric we've seen from prior MPCs will be cut back a bit," McCalgan said. "If that's the case, there might be room for a positive, short-term rand reaction."

Statistics South Africa publishes October consumer inflation at 08:00 GMT on Wednesday.