* Rand recovers from 3-yr low but volatility lurks
* Bonds weaker as investors anticipate more paper at auction
JOHANNESBURG, June 4 (Reuters) – South Africa’s rand
recovered its footing against the dollar on Monday after a rout
last week as fears the euro zone could disintegrate abated, but
a lack of a lasting solution to the region’s debt woes should
keep investors largely risk-averse.
The rand’s gains however failed to boost government bonds,
with demand largely muted as market players anticipated the
issuance of 2.1 billion rand ($247.40 million) worth of paper at
Tuesday’s weekly debt auction.
The rand gained as much as 1.4 percent to a session
high of 8.4725 against the dollar and was at 8.5001 by 1622 GMT,
up 1.05 percent from Friday’s close at 8.59.
The local unit had plunged to a three-year low of 8.71 to
the greenback on Friday, stung by heightened fears of a global
economic downturn after U.S. jobs data came in weaker than
expected.
Because South Africa’s markets are highly liquid, making it
very easy for portfolio investments to flow in and out of the
country, the rand tends to bear the brunt of any volatility in
global markets.
“All of the turmoil centred on the euro zone just delays any
recovery, and will probably simply extend the prevailing reach
for yield and the risk-on, risk-off dynamic in international
financial markets,” said Bruce Donald, head of rand strategy at
Standard Bank.
“The news for the rand will likely get worse before it gets
better.”
Continued…
