JOHANNESBURG: South Africa's rand weakened against the dollar on Tuesday, reversing overnight gains that took the currency to a two-month high.
Government bonds firmed as investors dumped equities for bonds, seeking safer assets in the wake of an earthquake in Japan that has hurt investor sentiment.
The rand briefly pierced through resistance at 6.85 and hit 6.8143, its strongest since Jan 14. The move was triggered partly by stop losses, traders said.
The 6.85 level is strong resistance for the rand and a 62 percent fibonacci retracement of its fall from January.
The rand was trading at 6.88 against the dollar at 0637 GMT, one percent weaker than New York's closing levels of 6.8143.
"The strong move last night was quite surprising given a fairly risk-off global environment in the face of that Japanese disaster," said Duncan Howes, a dealer at Absa Capital.
He saw the rand struggling to sustain its gains and trading between 6.85 and 6.95 in the session.
A close below 6.85 for a second day could indicate further gains and cannot be ruled out because lower interest rates in developed markets -- which have partly driven rand gains -- are likely to remain in place for longer than previously expected, especially in the United States.
Central bank Governor Gill Marcus will be speaking at an economic workshop around 0650 GMT and her comments will be closely watched as the bank will decide on interest rates next week.
In the fixed income markets, the yield on the 2015 bond fell 6.5 basis points to 7.77 percent and that on the 2026 issue was down 7.5 basis points at 8.91 percent.
Local stocks looked set to open weaker, in line with global markets. The JSE's blue chip Top-40 March futures contract was down two percent before the 0700 GMT start of trade.
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