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Johannesburg - The rand traded within easy sight of the previous day's 7-week highs against the dollar on Friday, although some analysts said its rally after the European Central Bank (ECB) unveiled a large bond-buying programme might have been overdone.
Government bonds extended gains, pushing the yield on the 2026 benchmark down 11 basis points to 7.225%, its lowest since late in May 2013 according to Reuters data.
The rand's strong performance this week, coupled with data showing a slowdown in consumer inflation, takes the pressure off the Reserve Bank’s to raise interest rates at its first policy meeting of the year next week.
The local currency traded at R11.4125 against the greenback, just slightly weaker than Thursday's New York close of R11.3940.
The rand scaled R11.3625 during Thursday's session, its strongest since December 8 according to Thomson Reuter’s data, after the ECB announced it would purchase €60bn worth of assets each month to boost growth.
"We worry that (the rand) is overstretched relative to its peers," Rand Merchant Bank currency analyst John Cairns said in a note.
"Having said that, there is more scope for euro downside in the next few days ... The bottom line: we are cautious on dollar/rand but see scope for euro/rand to drop even further."
