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Johannesburg - The rand was barely changed early on Thursday after a heavy sell-off at the start of the week, but the unit was still vulnerable to a myriad of structural problems facing the local economy, traders and analysts said.
Local stocks got off to a weak start, with the Top 40 index shedding 1.4% while the broader All-share was down 1.3%.
At 07:31 GMT the rand was trading at R16.5850 to the dollar, barely changed from Wednesday's close at R16.5800. The local unit was more than 7% firmer than the all-time low of R17.9950 it touched on Monday.
However, a weak domestic economic outlook, coupled with concerns about the global impact of slow growth in China, are likely to cap any significant rand gains.
"Although the South African currency is oversold, the country’s weak fundamentals do not warrant sustained recovery amid a risk-averse global environment at present," NKC African Economics said in a note.
"As such, we expect the rand to remain under pressure in coming weeks and months."
The rand has weakened as much as 18% against the dollar since mid-December, after President Jacob Zuma's firing of the finance minister triggered selling by investors worried about future government policy.
In a speech in London this week, Reserve Bank deputy governor Daniel Mminele said the sharply weaker rand and a severe drought posed significant risks to the inflation outlook and had further complicated monetary policy.
In fixed income, the benchmark government instrument due in 2026 was yielding 4.5 basis points higher at 9.6% compared with where it ended Wednesday trade.
