February 6, 2019 / 7:00 AM / 13 days ago

South Africa's rand tumbles in subdued trade

JOHANNESBURG, Feb 6 (Reuters) - South Africa’s rand weakened early on Wednesday as the dollar regained some ground and investors kept shy of the local currency awaiting signs of a recovery in the economy.

At 0640 GMT, the rand was 0.28 percent weaker at 13.4200 compared to an overnight close of 13.3825 in New York.

The dollar held steady after President Donald Trump’s State of the Union address, showing little reaction to indications of another government shutdown.

With activity in currency markets remaining subdued following holidays in Asia, the rand struggled to find takers as investors held on to gains after last week’s rally and awaited President Cyril Ramaphosa’s state of the nation speech on Thursday and the annual budget later in the month.

Recent data has shown the recovery in Africa’s most industrialised economy remains sluggish, although the rand remains an attractive carry target with inflation falling and the central bank set to switch to easing lending rates in 2019.

However, a Reuters poll this week found the rand was likely to lose about half of the 7 percent gains made against the greenback since the start of the year over the next 12 months, pressured by fiscal constraints and weak growth.

The only data release set for Wednesday is the South African Chamber of Commerce and Industry’s monthly business confidence indicator for January.

Bonds were also weaker, with the yield on the benchmark government issue due in 2026 adding 3 basis points to 8.62 percent.

Stocks were set to open flat at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.12 percent. (Reporting by Mfuneko Toyana; Editing by Rashmi Aich)

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