Rising hopes that South Africa has poised to pull out of its spell of economic malaise have seen the rand again win ground on currency markets.

The rand on Tuesday hit a rate of 9.57 to $1, setting a new 12-month high for the second day in a row.

The rise represents a rapid turnaround from the trough reached last December, when the rate hit 13.48 rand to $1, as fears mounted over inflation, and the instability in neighbouring Zimbabwe.

The declining rand only added to South Africa's economic problems last year, making imports more expensive and so increasing pressure for price rises.

South Africa' central bank raised interest rates by four percentage points to 13.5% in a bid to curb inflation.

Inflation to fall?

But while data on Tuesday showed inflation was still rising, with consumer prices increasing at an annual rate of 12.5% last month compared with 11.8% in September, economists believe pricing pressures will ease.

"We are all expecting the peak (in consumer inflation) to be here," said Monica Ambrosi, an economist at Standard Bank.

"That being the case the outlook is still that in the new year inflation will start coming down."

The decrease would allow room for an interest rate cut, boosting South Africa's business performance and the economy, and the attractions of the rand, analysts said.

The stable outlook has also encouraged bond investors, who would gain slim pickings from US or UK government bonds, to buy into the higher-yielding South African market.