Johannesburg - South Africa's rand reached its highest level in more than a week after stronger than expected GDP data on Tuesday, but struggled to hold on to its gains later in the session.
The rand was at 8.8700 to the dollar at 15h34 GMT, down 0.1 percent from its close in New York on Monday.
It firmed to 8.7790 earlier, its strongest since February 15, after spending much of the past month stuck in the 8.80-9.00 range.
The main driver was a surprise rise in fourth quarter gross domestic product to 2.1 percent, from 1.2 percent in the third quarter, due to a boost from the manufacturing and farm sectors.
However, “the 8.80 level has been a tough one for the rand to break and it seems to be the case again,” said Ion de Vleeschauwer, a trader at Bidvest Bank.
“There seems to be a lot of importer demand around those levels. There's lots of people looking to buy dollars whenever the rand shows a bit of strength.”
Overall, Africa's biggest economy grew 2.5 percent in 2012, from 3.5 percent the previous year, according to Statistics South Africa.
The rand is likely to remain rangebound ahead of Finance Minister Pravin Gordhan's budget speech on Wednesday. Growing risk aversion following Italy's post-election deadlock could also keep it subdued, according to analysts at Absa Capital.
“We remain of the opinion that the rand is stuck within an 8.80-8.95 range in the short term, while over the medium term (1-3 months) we believe the currency is likely to remain entrenched between 8.70/USD and 9.20/USD,” they wrote in a research note published on Tuesday.
The yield on the 2026 government bond inched up 2 basis points to 7.24 percent while that on the 2015 paper was down 2.5 basis points at 5.235 percent. - Reuters