South Africa's rand strengthened in early trade on Tuesday ahead of the release of a business conditions purchasing managers' index, as the US dollar weakened following dovish comments from Federal Reserve officials that boosted interest rate-cut bets. 

At 0604 GMT, the rand traded at 16.3350 against the dollar, up roughly 0.2% on Monday's close.

Minneapolis Fed President Neel Kashkari said on Monday that inflation was slowly easing, but there was a risk the jobless rate could "pop" higher, increasing the likelihood of a rate cut.

Investors currently expect at least two US rate cuts this year, while they look to the non-farm payroll report, due on Friday, for more monetary policy cues. 

Adam Phillips, Treasury specialist at Umkhulu Treasury, said in a research note that Kashkari's comments were viewed as dovish by operators and that services and composite PMIs for December, being released in all major economies, could provide an even better indicator of the direction of monetary policy. 

Domestic traders will also look to the S&P Global December whole-economy PMI at 0715 GMT for clues on business conditions in the country.

South Africa's benchmark 2035 government bond was firm in early deals, as the yield fell 1.5 basis points to 8.19%.