The rand strengthened from its noon levels in late afternoon trade on Tuesday as the dollar remained on the back foot as investors sought riskier assets and currencies.

At 3.41pm the rand was bid at 7.7101 to the dollar from its Monday night close of 7.8109. It was bid at 10.8583 to the euro from a previous 10.9843 and at 12.7428 against sterling from 12.9210.

The euro was bid at US$1.4081 from US$1.4072 overnight.

"We are very strong this afternoon. There is excellent offshore demand for the rand," a local trader said.

"We broke 7.78. It will be very interesting to see what will happen from here. This is a big level for the rand.

"If we close below 7.70 then we will move to 7.50. There doesn't seem to be any negative for the rand," he said.

Said JPMorgan in their forex report: "The action in $ZAR continues to develop in a trending bias following the break of the key 7.83/7.82 support area.

"With the short term corrective phase now complete, the risks point to a trending market again. Initial targets located at 7.65/7.50 now," analysts said.

Dow Jones Newswires reports the dollar is generally lower on Tuesday morning as investors tentatively seek out riskier assets and currencies. The British pound rallied to eight-month highs on favourable housing market news but then surrendered most of it gains.

With a relatively quiet data calendar in the US on Tuesday, general risk appetite has been the main driver of currency markets in the session so far.

"Generally, it's a slightly more favourable risk background again, which has typically been the driver of our markets in recent months," said Adam Cole, global head of currency strategy at RBC Capital Markets in London.

The moves in most major currency pairs have been restrained, and they remain well within recent trading ranges.

One exception is the pound, which hit an eight-month high at $1.6742 in earlier trading, from $1.6559 late on Monday, according to EBS. It's currently well off that high around $1.6570.

The sharp moves in the pound have been triggered by a rapid succession of conflicting economic data. "It's been a very mixed story with the news flow, basically," said RBC's Cole.

Surplus pulls bonds out of slumber

Bonds showed some signs of life on Tuesday after news broke of the first trade surplus in South Africa since 2006. Some small gains in the rand were also seen on the news.

By 3.11pm the short-term government R153 bond was bid at 7.170 percent from 7.180 percent at Monday's close. The medium-term R157 was at 8.440 percent from 8.455 percent, while the long-term R186 was bid at an unchanged 8.895 percent before.

I-Net Bridge