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Johannesburg - The rand retreated slightly against the dollar on Friday but was still on track for a weekly rise, with more gains possible next week should US data continue to point to the Federal Reserve holding off a rate hike.
Stocks followed emerging markets higher, lifted by improved investor sentiment towards risky assets after fairly upbeat Chinese GDP data.
The benchmark Top-40 index closed up 0.45% at 46 763 points while the broader All-Share index increased 0.36% to 53 038 points.
By 15:59 GMT, the rand traded 0.3% softer on the day at R14.5850/$, giving back gains in the previous session which had lifted it to a four-month high of 14.4445.
The currency was however still on track to end the week 2.5% stronger, according to Thomson Reuters data.
The rand has strengthened nearly 6% against the greenback so far in 2016, partly tracking an emerging market rally prompted by dovish comments from the US Federal Reserve.
It lost nearly a quarter of its value last year, suffering a heavy sell-off in December after President Jacob Zuma suddenly fired the finance minister.
The rand remains vulnerable to the threat of a downgrade by ratings agencies worried that Pretoria might stray from its prudent fiscal path.
"Should the dovish stance of the Fed continue, US data not signal material strength ... and South Africa not lose its investment grade status, the rand could see further marked attempts to strengthen to R14.00," Investec analyst Annabel Bishop said.
"Should South Africa lose its investment grade status at its upcoming country reviews then the rand would likely see substantial weakness, moving back towards 17.00/$."
On the bourse on Friday, Johannesburg-listed brewer SABMiller gained 2.33% to R884.12 after Anheuser-Busch InBev agreed on concessions with the government to secure regulatory approval for its $100 billion-plus takeover of SABMiller.
But resources gave up this week's earlier gains, with
Kumba Iron Ore down 4.9% at R98.90 while Harmony Gold weakened 3.95% to R51.86 and Sasol dropped 1.97% to R448.48.
"There's a bit of profit taking going into the weekend," said Independent Securities trader Ryan Woods.
Trading volumes were low, with 171 million shares changing hands compared with last year's daily average of 280 million.
Government bonds closed firmer, with the yield for the instrument due in 2026 adding 5.5 basis points to 9.02%.
Like the rand, however, government bonds have come back strongly from last year's lows, with the yield for the 10-year benchmark pulling back strongly from its December peak at 10.38%.
