South African rand weakens on current account jitters

A South African child holds a 50 rand note July 2. The rand sank to a fresh low against the dollar i..
A South African child holds a 50 rand note in a file photo.

JOHANNESBURG (Reuters) - South Africa's rand weakened against the dollar early on Tuesday as investors fretted about upcoming current account data for the second quarter.

At 0646 GMT, the rand was at 9.9850 per dollar, 0.35 percent weaker than its close in New York on Monday.

The rand is trading near its strongest level in a month but its strong two-day rally has been interrupted by concerns about South Africa's yawning current account gap, which has previously knocked the rand.

The Reserve Bank will release the second quarter data at 0800 GMT.

Economists expect the deficit to be little changed in rand terms but to widen to 5.95 percent of GDP from 5.8 percent in the first quarter.

The shortfall in the account widened to a record 6.8 percent in the third quarter of last year, hitting the rand.

"The risk of a wider-than-forecast deficit could push dollar/rand higher. South Africa's external imbalances are the key vulnerabilities that have seen the rand whacked during the recent emerging market rout," said Christopher Shiells, emerging market analyst at Informa Global Markets.

Yields on government bonds rose two basis points with the weaker rand. The 2026 benchmark yield was at 8.315 percent while the 2015 note traded at 6.19 percent.

Treasury is looking to sell 900 million rand in 2023 bonds, 900 million rand in 2031 and 550 million rand in 2037 paper in the session.

Results are due after the auction closes at 0900 GMT.

The Treasury announced it managed to place $2 billion of 12-year paper at a 5.875 percent coupon rate on Monday, attracting European and United States investors.