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Rand hovers near two-month low

Johannesburg - South Africa's rand was still struggling against the dollar on Tuesday after falling to two month lows overnight, with the country's weak economic fundamentals denting investor appetite.

At 08:56 SA time the rand traded at 10.6750 to the greenback, within striking distance of Monday's low of 10.6950, the weakest the local unit has been since March 27 according to Thomson Reuters data.

Africa's second largest economy, recently overtaken by Nigeria, has seen a slew of weak data that could prevent the Reserve Bank from hiking interest rates further this year, despite rising inflation.

Statistics South Africa reported last week that the economy shrank in the first quarter of 2014, the first contraction since a 2009 recession, as a platinum strike now in its 19th week hit mining output.

Tuesday's disappointing PMI data out of China, a major importer of South African commodities, could result in further rand weakness, Barclays Africa said in a note.

“Meanwhile, in the coming days, with the threat of more widespread industrial action beyond the platinum sector, coupled with expectations that the dollar will stay on the front foot this week ... the rand could maintain a weaker bias,” it said.

Government bonds were little changed from Monday's closing levels, with the secondary market benchmark due in 2026 flat at 8.385 percent while the 2015 issue slipped a basis point to 6.66 percent. - Reuters

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