Cape Town - South Africa’s rand swung between gains and losses near its strongest level in more than three weeks before the release of inflation data that may provide clues about the outlook for interest rates.

The currency has rebounded 4.1 percent since South African Reserve Bank Governor Gill Marcus unexpectedly increased the policy rate by 50 basis points to 5.5 percent on January 29, saying inflation is set to breach the 3 percent to 6 percent target range toward the middle of the year.

Consumer prices probably accelerated for a second month in January, a report may show on February 19.

“Recent consumer inflation numbers have come in below market expectations, and have also surprised the Reserve Bank to the lower side,” Bruce Donald, a currency strategist at Standard Bank Group Ltd. in Johannesburg, said in a note to clients.

“Another lower-than-expected number could, if the market is more focused on its monetary policy consequences, lead to rand weakness, and a higher-than-expected reading could translate to the opposite.”

The rand weakened 0.1 percent to 10.8759 per dollar by 11:09 a.m. in Johannesburg after gaining 0.2 percent earlier.

The currency advanced to 10.8403 on February 14, the strongest intraday level since January 22.

Yields on benchmark bonds due December 2026 dropped four basis points to 8.62 percent, the lowest since January 24 on a closing basis.

The consumer inflation rate in Africa’s biggest economy probably rose to 5.7 percent in January from 5.4 percent the previous month, according to the median estimate of 20 economists in a Bloomberg survey.

International investors bought a net 116 million rand ($11 million) of South African bonds on February 14, bringing inflows last week to 3.79 billion rand, according to data compiled by Bloomberg.

Foreigners dumped 21.3 billion rand of South African debt in the first five weeks of the year. - Bloomberg News