The rand firmed to a two-week best on Friday as emerging markets were boosted by increased expectations of the US central bank cutting lending rates this year.

At 1430 GMT the rand was 0.84% firmer at 14.15 after an overnight close of 14.30.

“What we’re seeing is how a recalibration in the Fed’s policy guidance is going to affect emerging market currencies going forward,” said Halen Bothma of ETM Analytics.

Traders of contracts tied to the Federal Reserve’s policy rate kept bets the US central bank will not deliver a single rate hike this year and will begin cutting rates next year.

With little on the local data front in the first week of the new year, the rand has looked to offshore events for direction, and has seen volatile trade with swings in the dollar setting the tone.

The rand reached a session best of 14.09 soon after trading in London kicked off before some of the momentum after a surge in US job growth helped steady the greenback, which traded 0.15% higher after a rocky start.

Survey data on Thursday showed US factory activity slowed more than expected, the latest sign the world’s largest economy was losing steam, igniting bets the Federal Reserve could switch from raising to cutting rates.

That aided the rand recovery from Wednesday’s “flash crash” that saw the unit plunge to a three-month low in a global selloff.

“Events in the US will remain a determining factor for the rand, contributing to the ongoing capriciousness of the local exchange rate,” said Annabel Bishop, senior economist at Investec.

Bonds were firmer, with yield on the benchmark paper due in 2026 down 5 basis points to 8.8%, its lowest since mid-August.

Stocks also continued to regain some of the losses they had endured in the first few days of the new year, with the Johannesburg Stock Exchange’s top-40 index up 0.96% to 46 059 points and the broader all-share index up 0.82% to 52 093 by 1511 GMT.

Consumer-focused sectors, namely retailers and banks, led the top-40 index upwards, with Truworths, The Foschini Group and Mr Price at the top, as well as bourse heavyweight Naspers, which was up 2.3%.

AngloGold Ashanti, meanwhile, was the worst performer on the index, down 4%, after benefiting from rising gold prices as investors retreated to safer assets earlier in the week.