Johannesburg - South Africa's rand edged higher against the dollar on Thursday as fears of an imminent US-led military strike on Syria eased, but the currency could suffer if local producer inflation data disappoints.
The rand was at 10.290 to the dollar at 06h54 GMT, up nearly 0.3 percent from Wednesday's New York close, extending a recovery from a new four-year low of 10.510 reached on Wednesday.
Emerging market currencies have been hit in recent days on concerns of possible Western military action in Syria, which has pushed investors towards safe-haven currencies like the US dollar and Swiss franc.
Expectations that the US Federal Reserve could begin tapering its bond purchases as early as next month have also led to a flight from risky assets.
“Although we are not surprised that rand bulls have locked in some profits, given the pace and magnitude of the latest bout of weakness, we think the rand remains vulnerable,” Absa Capital analysts wrote in a morning note.
South Africa's budget and current account deficits have increased the country's vulnerability to outflows while a wave of strikes in the car manufacturing, construction and transport sectors has hurt investor confidence.
Labour unrest is set to intensify as a work stoppage by gold miners could start as early as Sunday, while workers at petrol stations and car dealerships plan to go on strike on Monday.
Statistics South Africa is due to release producer price inflation data for July at 09h30 GMT. Trade data for July is also expected on Friday.
Government bonds were flat, with the 2026 and 2015 issues yielding 8.53 percent and 6.59 percent respectively. - Reuters