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Rand in recovery mode as recession shock eases

After second quarter gross domestic product data on Tuesday showing the economy had shrunk 0.7% knocked more than 4% off the rand, it has steadied, triggering some short-covering as sellers looked to close positions.

Picture: Supplied

JOHANNESBURG - The rand continued to recover early on Friday as a narrowing of the current account deficit helped ease some of the shock of the economy tripping into recession, while profit-taking on the recent slump also aided the currency.

At 0640 GMT the rand was 0.75% firmer at R15.2200 per dollar, having reached a session-best R15.1550.

After second quarter gross domestic product data on Tuesday showing the economy had shrunk 0.7% knocked more than 4% off the rand, it has steadied, triggering some short-covering as sellers looked to close positions.

South Africa’s current account deficit narrowed to 3.3% of GDP in the second quarter from 4.6%, and although that was followed by a statement from Moody’s warning the recession was credit-negative, the data sparked some significant rand demand. Currency strategists see a relief period ahead for the rand and fellow emerging markets following the sharp sell-off in August. Employment data from the United States due later in the session is seen keeping dollar bulls at bay.

Bonds were also in recovery mode, with the yield on the benchmark government paper due in 2026 down 3 basis points to 9.16%.

Stocks were set to open firer at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.13%.