South African central bank Governor Tito Mboweni warned on Wednesday the rand recent strength may be overdone and suggested a retracement may be due in the next few days.
The rand ouched a fresh 13-month high of 7.4141 against the dollar earlier in the day, bolstered by a soft greenback, high commodity prices and speculation about talks between India's mobile phone operator Bharti Airtel and MTN.
"The big issue is to look at the trade-weighted index, that index seems to suggest that the current levels might be a little overdone," Mboweni told Reuters in a telephone interview. "Maybe some retracement will occur in the next couple of days."
The rand weakened after the comments, touching a session low of 7.57, down from 7.5040 in earlier trading. Mboweni expressed similar concerns in June when the rand was changing hands at around 7.90 per dollar.
The rand's trade-weighted index — which calculates it against a basket of currencies made up of the euro with the biggest weighting, the dollar, Chinese yuan, British pound and Japanese yen — stood at 70.76 on Wednesday, its highest level in more than a year, and compared with around 55 in March this year.
Mboweni reiterated that the central bank's primary objective was to tackle inflation rather than the exchange rate, but said there appeared to be a misalignment in the currency market.
"Clearly there is a bit of misalignment that is taking place and that the dollar weakness clearly seems to be one of the factors which are moving the cross rates," he said, adding high metal prices were also having an impact on the rand.
"We need to be cognizant of what is happening to the metals and the possible impact thereof," he said.
The price of gold — a key South African export — topped $1,000 an ounce this week for the first time since February before retreating. Meanwhile, platinum, of which the country is the world's biggest producer, climbed to a 12-month high.
The euro, the currency of South Africa's main trading partner, extended gains against the dollar amid a broad sell-off in the U.S. currency, thanks to increasing optimism over global growth that has spurred investors' risk appetite.
South Africa's rand is one of the world's best performing currencies against the dollar this year, having strengthened almost 30 percent.
