JOHANNESBURG: The rand weakened against the dollar early on Tuesday, pressured by a bleak global growth outlook after soft Chinese data, while bonds firmed slightly as investors awaited the results of a weekly debt auction likely to be dominated by offshore buying.
The rand was weighed down by weak Chinese June import data which showed imports grew at half the expected pace - a slowdown that is likely to cause a deterioration in South Africa's current account deficit as exports slow.
Over 35 percent of South Africa's exports go to Asia, against 25 percent to the euro zone.
The weak Chinese data signals a bigger gap in South Africa's trade account, which drove the current account to its worst level in over three years in the first quarter.
The rand weakened 0.3 percent to 8.2414/dollar at 0644 GMT but was within Monday's trading range and firmer than the previous session's low of 8.30.
"The Chinese data is impacting general risk appetite, but also more acutely South African assets due to the trade ties," said Christopher Shiells, emerging market analyst at Informa Global Markets.
Yields on government bonds nudged lower to 5.94 percent on the 2015 and 7.865 percent on the 2026 issue .
The Treasury is looking to sell 800 million rand of its 2031 bond, 800 million rand of the 2023 and 500 million rand of the 2018 at a weekly auction.
Offshore investors, who bought over 20 billion rand of local debt last month and drove yields to record lows, are expected to pick up the most stock.
"We continue to see strong foreign demand for South African bonds. We expect these inflows to persist over the coming months in the run up to the WGBI reset in October," said Absa Capital in a note to investors.
South African bonds are due to be included in the Citigroup World Government Bond Index (WGBI) on Oct. 1, the main factor behind sustained foreign inflows into the local debt market in the last few months.
Results of the auction will be out after auction closes at 0900 GMT.
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