S.African rand recovers footing but economy still a drag

JOHANNESBURG (Reuters) - South Africa's rand hovered near two week highs against the dollar on Tuesday with sentiment still buoyant after a sharply narrower February trade deficit, although an overally dim economic outlook could cap gains.

By 0658 GMT the local unit traded at 9.1830 to the greenback after ending Monday's session at 9.1975. It also edged up against the euro to 11.7707 from 11.8042.

Government bonds were also firmer despite the anticipated injection of 2.35 billion rand worth of new paper at a weekly auction later in the day.

The yield for the 2026 paper was down 2.5 basis points at 7.36 percent and that for the paper due in 2015 fell three basis points to 5.465 percent.

Sentiment for the currency has received a boost after data last week showed South Africa's trade deficit narrowed sharply to 9.5 billion rand in February from nearly 25 billion rand the previous month.

"The (trade data) came as a huge relief which many in the market are interpreting as early signs that the weaker rand is starting to have a positive effect in restoring balance to the trade and current account deficits," said Tradition Analytics in a note.

The rand has already slid nearly 9 percent against the dollar in the first three months of the year, weighed down by data pointing to an economy struggling to grow after a 2009 recession and strikes which have cut mining output.

"The imbalances that have resulted in the weaker rand trend in the past 18 months remains very much intact and today investors will gain a fresh glimpse at these imbalances through the release of the latest PMI figures," said Tradition Analytics.

Source: http://news.yahoo.com/african-rand-recovers-footing-economy-still-drag-070841072--finance.html

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