Reserve Bank is expected to keep its repo rate at 5.5 %.(SABC)
The rand rallied to a near one-week high against the dollar on Tuesday as an uptick in risk appetite boosted emerging market assets, while government debt climbed in a market expecting the central bank to keep rates on hold this week.
Forward rate agreements were however still pricing in the off chance of a 50 basis point increase in the repo rate as the Reserve Bank weighs the risks to inflation against concerns about lacklustre growth in Africa's biggest economy.
By 1544 GMT the rand was trading 0.7% firmer at 10.7600 to the dollar compared with Monday's New York close. The currency climbed to 10.7540 earlier in the session, the strongest it has been since March 19, according to Thomson Reuters data.
Government bonds tracked the currency higher, with the secondary market taking its cue from a well supported weekly primary debt auction earlier in the day.
"It's all about what will come out of the MPC (monetary policy committee) later this week and the outlook from that," said World Wide Capital Securities head of bond trading Marten Banninga.
"People are becoming more and more aware of the growth outlook and thinking this meeting there will be no rate hike. That explains the demand for bonds we've seen in the last two days. The rand has also played a role.
"The FRA's are still looking at a possible rate hike ... but I do think more and more guys are saying look at the growth outlook, it's deteriorating at this point time."
Twenty-three of 30 economists polled by Reuters this week expected the Reserve Bank to keep its repo rate at 5.5 % on Thursday after lifting it by 50 basis points in January, with a recent recovery in the rand helping ease inflation pressures.