Johannesburg- The rand retreated on Friday after strong gains in the previous session, making it one of the lower three performers in a basket of emerging market currencies trading against the dollar.

Dealers also looked poised to sell the currency should US payrolls data due later in the session disappoint.

South Africa's currency received a surprise boost from better-than-expected domestic current account data on Thursday, which drove it to one-month highs against the dollar.

The unit broke through 8.74 resistance but technical charts suggested the move may have been overdone and the rand started to correct in Friday's early session.

By 0635 GMT, the rand was at 8.70/dollar compared to a New York close of 8.6850.

“After yesterday's sharp move, the rand is now probably overextended. Look for dollar/rand to trade back towards the 8.70 level this morning, with renewed volatility in the afternoon following the release of the US non-farm payrolls figures,” Rand Merchant Bank said in a note.

The rand is a very volatile currency and vulnerable to swings in global investor sentiment. Worse-than-expected US payroll numbers, pointing to possible stagnation in a recovery by the world's biggest economy, may put pressure on risky assets.

Yields on government bonds were down 2.5 basis points to 5.48 percent on the 2015 note and 0.5 basis points on the 2026 issue.

Treasury will sell inflation-linked paper at 0900 GMT at its second last sale for the year and demand should be high. Yields are expected to clear at market prices or below, dealers said. - Reuters