Johannesburg - The rand rose against the dollar yesterday, while bond yields edged lower in a choppy session.
Late in the day the dollar was quoted at R6,1600, down from R6,1750 late on Monday but up from an intraday low of R6,1525.
Dealers said analysts had argued the currency was perhaps undervalued despite political uncertainty ahead of the June elections.
The rand is now expected to test the next major resistance level of R6,1500 against the dollar. If this is breached, the rand is expected to strengthen further, said dealers.
The rand's positive performance injected activity into the local debt market, although an initial rapid fall in yields was reversed about mid-morning by a poorly received auction of government securities.
Yesterday's auction was R700 million in 26-year R186 government bonds.
The military situation in the Balkans overhung local bonds and, combined with the surplus of paper, pushed up the yield on the benchmark six-year R150 government bond to an intraday high of 14,310 percent.
Traders said much of the attention had shifted to the long end of the debt spectrum, with the yield on the R186 trading at 3 basis points below the R150.
Late in the afternoon the R150 bond was yielding 14,300 percent, down from 14,320 percent late on Monday.
At the Reserve Bank's securities repurchase auction, the country's most influential interest rate eased almost 2 basis points to 15,997 percent, its lowest level since May 23 1998 and puncturing the psychologically important 16 percent level.
In the money market, most major institutions quoted the rate on three-month negotiable certificates of deposit in a unchanged band of 14,30-14,80 percent.