South Africa's rand retreats, current account could weigh

Reuters
New South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg
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South African bank notes featuring an image of former South African President Nelson Mandela are displayed …

JOHANNESBURG (Reuters) - South Africa's rand pulled back against the dollar on Monday after strong gains in the previous session and could extend losses this week if the country's current account deficit widens more than expected.

The ever-present threat of strikes will also keep investors wary about the outlook for Africa's biggest economy, which has been beset by often violent wage-related union unrest, with more than 60 people killed in labour strife since last year.

By 0646 GMT the rand was 0.31 percent softer at 10.0305 per dollar, coming off last week's three-week high of 10.00.

Government bonds held their ground in early trade, with yields dropping 2.5 basis points to 8.39 percent for the 2026 paper and three basis points to 6.31 percent for the paper due in 2015.

The rand rallied strongly on Friday after U.S. jobs numbers came in below expectations, weakening the case for the U.S. Federal Reserve to begin unwinding its monetary stimulus programme that has injected billions of dollars into emerging markets.

But domestic events could cap any further gains this week, with petrol station and car dealership workers planning to stay away from work on Monday as others workers in the auto manufacturing and gold mining sectors end their own strikes.

Added to that, economists expect a widening of the current account, a long-standing weak spot for the rand, when the Reserve Bank releases its second quarter bulletin on Tuesday.

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