JOHANNESBURG: South Africa's rand gained more than one percent against the dollar on Tuesday on hopes for a stimulus in China after its economy grew in the fourth quarter of 2015 at its weakest pace in nearly seven years.
There was a growing expectation that more monetary easing measures were imminent, improving sentiment in China's stock markets during the afternoon session
The rand firmed 1.34 percent to 16.6250 by 0933 GMT.
Ricardo Da Camara, market analyst at ETM Analytics, said China's stimulus measures have been one of the "key risk topics on everybody's radar" as investors fret over the health of Beijing's economy.
"All those easing measures are basically what investors are perhaps pinning their hopes on that they (Bank of China) would introduce those stimulus measures which would then hopefully be growth supportive, keeping demand for commodities in place."
South African government bonds strengthened alongside the rand, with the yield on the benchmark 2026 issue falling 10.5 basis points to 9.725 percent.
"Although growth is slightly lower, it is broadly showing stability and is still largely in line with the government's annual growth target of about 7 percent," said Rand Bank Merchant's economist Isaah Mhlanga.
The local currency has fallen more than 8 percent against the dollar this year, weighed down by concerns over the outlook for the sickly local economy as well as slowing growth in China, a key importer of South African commodities.
Despite the lethargy in the South African economy, traders and analysts are pricing in the chance of a 25 or 50 basis point rate hike when the central bank holds its first policy meeting of the year next week, against the backdrop of rising inflation.
The South African bourse also rallied, with the Top-40 up 1.72 percent to 42,817 points and the broader all-share index adding 1.57 percent to 47,600 points.
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