Rand gains but still vulnerable to hawkish Fed

Johannesburg - The rand recovered against the dollar on Monday after the greenback sagged ahead of a slew of data due this week, but remained in the sell-off territory as heightened US rate hike concerns weakened appetite for risky assets.

At 17:42 the rand was 0.45% firmer to R13.2495/$, extending its recovery after tumbling to an all-time low of 14.00 last week.

"The movement in the rand was offshore, there's definitely no improvement in the sentiment there but nothing substantial heading into the Fed meeting in a couple of weeks," said Christie Viljoen, senior economist NKC African Economics.

"I think it's going to seesaw for quite a while."

Traders warned that the local currency's gain will be short-lived ahead of Tuesday's Chinese purchasing managers' index figure, and most importantly, Friday's payroll data in the United States.

China lingers as a major concern for emerging market currencies like South Africa as it is the largest trading partner for Africa's most industrialised economy, consuming its commodities.

Weak data from the world's second-biggest economy would send the markets into a tailspin, traders said.

Viljoen added that there was not much enthusiasm to get the rand below the R12.00 mark as investors were avoiding risky assets heading to the Federal Reserve meeting on September 16 to September 17, which could result in them losing money during volatility.

Investors shrugged off local trade balance data showing the trade account turned to an unexpected R400m deficit in July after two months of large surpluses.

A Reuters poll had forecast a surplus of R1.50bn.

Analysts said renewed weakness of commodity prices and the planned mothballing of some mining shafts are likely to dampen exports of mineral products amid weak local economic growth.

The yield for the 2026 benchmark was down 0.5 basis points at 8.355$.