JOHANNESBURG: South Africa's rand extended gains on Thursday as the dollar slipped, hit by growing concerns over the U.S. economy.
By 1410 GMT the rand had firmed 0.72 percent to 11.7950 per dollar, adding to gains that buoyed the unit to a 2-week high in the previous session after retail data from the world's strongest economy underwhelmed.
April retail figures showed reduced spending by U.S. consumers while import prices fell for a 10th straight month, sending the dollar index 0.2 percent lower to its weakest since January against a basket of major currencies.
"The U.S. data confounded expectations of a strong increase and brought into question whether the weakness in the U.S. economy in 1Q15 was truly just weather related or something more structural," said John Cairns of RMB in a market note.
Government bonds also firmed as interest in domestic fixed income returned after a sell-off earlier in the week.
"A lot of offshore participants have probably found a little bit of interest in our markets and have piled back in," said Cheslyn Francis, a portfolio manager with Afrifocus Securities.
The benchmark paper due in 2026 shed 10 basis points to 8.025 percent, recovering after the yield hit a 7-month high on Wednesday as a bonds selloff in developed markets spilled into EM assets.
Sentiment towards South African assets, however, remains in the balance with governor Lesetja Kganyago saying he expected the local bond and stock markets to drop as the U.S. economy recovered and interest rates there rose.
"It remains a difficult balancing act. The underlying issues are inflation, when the Fed is going to hike rates, and how the power constraints are handled," Francis added.
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