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Rand vulnerable, could weaken on US jobs

Johannesburg - South Africa's rand was largely stable against the dollar on Friday as growing concerns about the health of the local economy offset boost from a generally a risk-positive global environment.

The local unit briefly retreated after central bank data showed South Africa's gold and foreign exchange reserves were slightly lower in May compared with the previous month.

The rand struggled to keep the previous day's momentum, when it snapped four days of losses after the European Central Bank eased monetary policy, boosting demand for high yielding emerging markets.

By 08:55 SA time the rand was trading at 10.6935 to the dollar, little changed from its close at 10.6950 in New York on Thursday.

The risk of a sovereign credit downgrade next week and the possibility of more widespread industrial action, should keep the rand under pressure, Barclays Africa said in a note.

Fitch and Standard and Poor's are due to release their latest credit reviews on South Africa on June 13, with analysts expecting downgrades after the economy contracted in the first quarter of the year, hit by a crippling platinum strike.

“There is a risk that this afternoon's US employment report could prove stronger than expected, and the rand could lose more ground into the weekend if this report does surprise to the upside,” Barclays Africa added.

Unlike the rand, government bonds were still on a firm footing after Thursday's post-ECB rally, pushing yields lower.

The yield for the benchmark 2026 issue fell 5 basis points to 8.295 percent, while the 2015 bond at the shorter end of the curve was down 4 basis points at 6.64 percent. - Reuters

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