JOHANNESBURG (Reuters) - South Africa’s rand was slightly firmer against the dollar on Tuesday and government bonds also edged higher, but worries about the euro zone credit crisis were likely to limit gains.
The rand was up 0.32 percent at 8.37 to the greenback by 0653 GMT after ending Monday’s session at 8.3970.
“The rand will struggle to rally back to levels more in line with South African fundamentals whilst a major credit crunch is unfolding abroad,” Tradition Analytics said in a note to clients.
“It is safe to say that the credit crunch is elevating risk and withdrawing liquidity from emerging markets whose currencies would otherwise be trading at far stronger levels than is the case at the moment.”
The rand has been hit by heightened global risk aversion, particularly in the second half of this year, as investors worry about the impact of a sovereign debt crisis affecting some euro zone nations.
The domestic currency is on track to end the year more than 20 percent weaker against the dollar, which would be its worst annual performance since 2008.
South Africa’s government bonds were firmer on Tuesday, and yields fell in tandem.
The yield on the four-year bond was down three basis points at 6.91 while that on the longer-dated 2026 was down five basis points at 8.655 percent.