JOHANNESBURG: South Africa's rand firmed slightly against the dollar in early trade Tuesday although market watchers said this could be a temporary reprieve as foreign accounts sell local bonds and stocks.
The rand was at 8.8350 to the dollar the dollar by 0732 GMT, a 0.27 percent rise from 8.8634 when markets closed on Monday.
The local currency has remained largely on the ropes since the start of the year, with investors nervous about the negative impact on growth from strikes in the key mining sector bail out of local assets.
Offshore investors sold 3.8 billion rand worth of South African shares and 2 billion rand in bonds last week, data from the JSE securities exchange showed.
"A lot is being made of the fact that portfolio flows turned very negative last week offering perspective on why the rand has under-performed most other emerging markets," said Tradition Analytics in a market note.
"With South Africa's imbalances being what they are, the economy has become heavily reliant on portfolio inflows to remain well funded and an outflow of more than 6 billion rand billion in just one week obviously leaves the rand vulnerable, it said.
Government bonds edged up slightly from recent oversold levels and as some players bet on the off chance of the Reserve Bank surprising the market with a rate cut on Thursday.
The yield on the 2026 benchmark issue was down 3.5 basis points at 7.215 percent while that for the 2015 bond dipped 2 basis points to 5.32 percent.
Economists polled by Reuters on Friday also expected rates to stay unchanged after the Jan. 22-24 meeting, as the Reserve Bank balances sluggish growth with risks to inflation, including from a sharply weaker rand.
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