South Africa’s rand gained more than one percent on Wednesday, reversing losses from earlier in the session to trade at a three-day high as investors betting on a dollar recovery bought the local currency cheap.

At 15:00 GMT the rand was 0.86% firmer at 12.36 per dollar.

Having started the session on the backfoot near the 13.50 support level with investors taking profits and looking for defensive positions as key technical levels approached, the unit found buying interest as London and then New York came on line.

Volumes were concentrated around 12.40 as investors looked for short opportunities ahead of US manufacturing data and minutes of the Federal Reserve’s last meeting due later in the day, and jobs figures on Friday.

The dollar’s rebound had already started, with the index measuring it against a basket of major currencies up 0.3% after sliding to a 3-1/2 month low in the previous weeks.

Technical indicators also suggest the rand is overbought and due some weakness having touched its firmest in 2-1/2 years a week ago after Cyril Ramaphosa was elected President Jacob Zuma’s successor as head of the African National Congress (ANC).

“Investors are viewing the possibility of Zuma being dismissed from office early as a positive sign for the rand,” said currency analyst at German-based Commerzbank Antje Praefcke in a note.

“Prices in the area of 12.30-35 in USD-ZAR seem slightly excessive to me though. I don’t totally trust the rand euphoria,” Praefcke said.

On the bourse, banks came under pressure as investors booked profits from a rally fuelled by Ramaphosa’s election.

Standard Bank dropped 4.7% and rival FirstRand lost 4.5%.

The blue-chip index JSE Top-40 ended 0.02% higher and the broader All-share index was off 0.17%.

In fixed income, government bonds were weaker, with the yield on the government bond due in 2026 adding 6 basis points to 8.655%.