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Rand gains ground on data revision

Johannesburg - The rand recovered to two week highs against the dollar on Friday, lifted by an official revision of trade data which has left the country with a much narrower deficit than previously stated.

The revision points to a narrower current account shortfall for Africa's biggest economy, but the market relief could be fleeting as the country relies heavily on capital flows which are prone to volatility, to plug the gap.

The rand pushed to R10.1205/$ versus the greenback earlier on Friday, its strongest since Nov. 4, but came back to trade at  R10.1775 by 14:56 GMT, up 0.2% from Thursday's close.

Government bonds were also on a firmer footing, with the yield for the paper in 2026, the secondary market benchmark, sliding 12 basis points on the day to 8.095%.

The yield for the bond due in 2015 at the shorter end of the curve fell by the same margin to 6.03%.

The rand was trading around R10.3500/$ late on Thursday before the national revenue service said it had cut South Africa's 2012 trade deficit to about a third of the previously stated shortfall after incorporating previously excluded trade with its neighbours.

It halved the cumulative shortfall for the year to September to about 64 billion rand, a move which should reduce the current account gap for Africa's biggest economy, which at around 6 percent of GDP remains a weak spot for the rand.

But the rand should stay under pressure in the long term as South Africa ranks among emerging markets likely to be hardest hit by the eventual scaling back of US monetary stimulus, a key source of cheap dollars for high-yielding but riskier assets.

"Although the current account deficit may be revised smaller, the shortfall is still heavily financed by short-term inflows of capital, leaving the currency vulnerable when the U.S. Fed eventually begins to taper," said Capital Economics market analyst Shilan Shah.

"The upshot of this is that the rand is likely to remain in the firing line over the coming months."

However, analysts recently polled by Reuters earlier this month do not see too much further down side for the rand over the next few months, as it has already shaved off more than a fifth of its value against the dollar since the start of 2013 .
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