Rand retreats after strong gains

Johannesburg - The rand retreated from last week’s five-month highs against the dollar on Monday, having posted its best weekly performance since December, with uncertainty over a bailout for debt-ridden Greece weighing on investors' risk appetite.

Government bonds also pulled back, although support should come from foreigners attracted by the relatively high yields on local debt.

Yields rose on Monday, with both the three-year bond and the 2026 issue each adding five basis points to 6.48% and 8.135% respectively.

By 06:56 GMT, the rand was at R7.5780 to the dollar, a 0.77% decline from Friday's close at R7.5200.

From being the best performer on Friday among 20 emerging market currencies monitored by Reuters, the rand was second worst on Monday after the Polish zloty, although the two currencies have rallied the most against the greenback so far this year.

“Technically, dollar-rand has been oversold for a long time now and one could be forgiven for thinking that it needs to take a breather,” Tradition Analytics said in a note.

“This week may be the week when the pair eventually stalls, but we would wait for confirmation of that before turning the view held for the past two weeks, especially with the fundamentals abroad holding the potential to boost sentiment.”

The rand’s recent gains have in large part been due to favourable economic data out of the US, which has boosted emerging market sentiment, including better-than-expected jobs numbers on Friday.

But on Monday the local currency tracked the euro, which slipped as Greek coalition parties dithered on approving the terms for a new bailout with a deadline just hours away, raising worries the whole rescue scheme could flop.