JOHANNESBURG: South Africa's rand followed the euro and firmed against the dollar on Tuesday despite the local current account recording its largest deficit in nearly four years in the second quarter.
The euro advanced to a four-month high against the dollar on increased expectations a German court will back the euro zone bailout fund, while the greenback fell broadly on speculation the Federal Reserve will ease monetary policy further this week to boost a slumping US economy.
The rand at 1600 GMT traded at 8.1550 against the dollar, 0.45 percent firmer than Monday's New York close of 8.19. It earlier hit a one-month high of 8.1261.
In its latest Quarterly Bulletin, South Africa's Reserve Bank said the current account gap widened to 200 billion rand ($24.5 billion) or 6.4 percent of GDP from 4.9 percent in the first quarter.
State spending on wages pushed gross domestic expenditure to 4.7 percent.
"The deficit will be in the back of investor's minds, but it's not going to be the be-all and end all of the rand," said RMB trader Ian Martin.
Separately, data showed a recovery in manufacturing output to a 10-month high in July, although economists said they still expected the sector, which contributes 15 percent to gross domestic product, to moderate in the coming months.
The yield on the three-year bond was up 2 basis points at 5.370 percent, while longer dated 14-year paper gained 2.5 basis points at 7.295 percent.
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