The rand was on the back foot as it opened weaker at R12.49 to the dollar, 0.18 percent weaker compared with the closing price of R12.47 on Tuesday evening.
Despite opening weaker, the rand gained some strength during the day as it traded below the R12.40 level by lunchtime and by 5pm the currency was bid at R12.34.
Some analysts attributed the recent weakening of the rand to investors taking profits and seeking defensive positions with key technical levels approaching ahead of jobs data in the US.
Bianca Botes of Peregrine Treasury Solutions said yesterday that the rand weakened after a strong start on Tuesday morning, from R12.30 to R12.51, before moving back to R12.36 at midday.
“The rand is overbought at the moment partly owing to an overreaction to the Cyril Ramaphosa win, but it is likely to lose some ground as the afterglow wears off,” Botes said.
The rand rallied more than 6 percent after Ramaphosa was elected new president of the ANC on December 18, and it broke through the R13 level.
By December 28, the rand reached its strongest level of R12.26, its highest level in more than two years.
Botes said the subdued dollar recently also contributed to the strengthening of the rand in the last two weeks.
The dollar had lost some ground following the Federal Reserve’s December policy meeting when it raised interest rates for the third time in 2017. The dollar slid to a three-month low as a result.
But Botes said she believed the dollar was poised to make a comeback against the local currency. “A subdued dollar also contributed to the recent rand rally, but as we move out of the festive season and liquidity returns, the dollar can be seen steadily regaining ground and putting pressure on the local currency,” she said.
Emerging markets have done well recently, with the rand moving from R14.47 in mid-November to the current levels of R12.35.