JOHANNESBURG (Reuters) - South Africa's rand came off earlier highs against the dollar on Thursday, dragged lower by data showing a contraction in manufacturing output, suggesting the economy is still struggling to grow.
The rand traded at 8.8960 to the dollar at 1530 GMT, little changed from Wednesday's close at 8.9010 in New York.
The currency touched a 6-week high of 8.8572 earlier, before Statistics South Africa reported that factory production fell 2.9 percent year-on-year in February, the first contraction in five months.
"Mining and manufacturing data were in focus and the local unit has posted some weakness," Tradition Analytics said in a market update.
With the main domestic data for the week now out of the way, the market will again turn to offshore factors for direction, it said.
The rand has recovered some ground against the greenback in the past week as investors flock into higher yielding emerging market assets including South African bonds after Japan unveiled plans to drastically loosen up its monetary policy.
Earlier this week, Finance Minister Pravin Gordhan said he saw no immediate threat to the portfolio flows that have helped the rand push back from last month's four-year trough of 9.3655 to the dollar.
But the strong rally on the fixed income market, which had pulled yields at the longer end of the curve in particular to multi-year lows, appears to have lost some steam in the last two trading sessions.
On Thursday the yield on the 2026 benchmark government bond edged up 1.5 basis points to 7.055 percent although that for the shorter-dated paper due in 2015 edged down half a basis point to 5.3 percent.