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Johannesburg - The rand gained more than 1% against the dollar on Wednesday as the greenback slipped, with investors pushing back bets of a 2015 rate hike by the Federal Reserve.
Stocks benefited from the prospect of interest rates staying on hold for longer, with the positive sentiment pushing shares on the JSE into the black.
Government bonds lapped up the return of risk appetite to extend a recent rally. Yields on the benchmark 2026 paper fell for a seventh straight session, shedding 6.5 basis points on the day to 8.17%, a 2-month low.
At 17:00 the rand had gained 1.18% to R13.3550 per dollar, its firmest level since September 21.
The US's trade deficit widened by its most in five months in August, reinforcing expectations that the Fed would delay hiking rates for the first time since 2006 until next year, pushing the dollar lower.
"Calming emerging markets have helped the rand stage somewhat of a comeback and dragged local government bond yields to ranges last seen in early August," analyst at NKC African Economics said in a note.
"Though respite might only be temporary as 2015 rate hike from US Fed is still on table."
Investors, in the meantime, are taking the opportunity to pile into emerging market stocks.
The blue-chip JSE Top-40 index was up 1.16% to 47 162 points while the broader All-share index rose 0.95% to 52 565 points.
"Investors are willing to put their money into riskier assets, and they like some of the stocks on our market," said Mark Loubser, fund manager as Independent Securities.
Resource giant Anglo American gained 11.31% to R137.47, while rival BHP Billiton rallied 4.97% to R229.69.
MTN and Sasol, two favourites among international investors, were up 3.03% to R186.90 and 3.81% to R434.40 respectively.
"Markets are very volatile and they react to the upside quite quickly. With the Fed possibly delaying the hike, sentiment has definitely swung back to positive," Loubser said.
