Rand recovers from early losses

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Johannesburg - South Africa's rand ended slightly firmer against the dollar on Monday, recovering some early morning losses with dealers saying the sell-off was overdone for the short term.

By 15h50 GMT, the rand was at 9.17/dollar, slightly firmer but not far off its 9.18 close in New York on Friday.

Analysts said South Africa's economic weaknesses, such as its current account gap and mine labour tensions, have already been priced into the rand and although the currency will remain under pressure, it will need a fresh bout of negative news to weaken through 9.29/dollar.

Dealers are also loathe to take big positions ahead of key inflation data and the second monetary policy decision of the year on Wednesday.

The Johannesburg Stock Exchange reported earlier in the session that offshore accounts had sold R4.3-billion in local shares and picked up R1.6-billion in local bonds.

Investors worry that a “risk off” mood triggered by euro zone tensions could drive sustained outflows, which would intensify worries about funding South Africa's current account and budget deficits.

The rand was recovering from weaker levels hit earlier in the session as it tracked a euro hit by investor alarm about a bailout plan for Cyprus.

Europe absorbs about a quarter of South African exports, making the rand vulnerable to its problems. The rand is also one of the more volatile currencies in its emerging market grouping.

Analysts say the rand is likely to remain weak, which will help exports and aid in narrowing the current account gap.

“A sober reminder is the habit markets have of taking steps themselves to correct the imbalances that should be addressed by policymakers,” said Colen Garrow, economist at Meganomics.

“Currencies often carry the brunt of market concerns, especially those which have many free floating features, such as the rand exchange rate.”

Bond prices ended little changed, with the yield on the benchmark government bond down half a basis point to 7.4 percent. - Reuters


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