Rand recovers footing but weak economy a risk

Johannesburg - Government bonds edged higher on Wednesday and the rand was on a slightly firmer footing against the dollar after a flare-up in risk aversion pushed it to a week's low in the previous session.

The blue-chip Top 40 stock index was up 1.44% at the start of trade, while the All-share index gained 1.42%.

In fixed income, the yield for the benchmark instrument maturing in 2026 fell 3.5 basis points to 8.405%.

At 09:19 the rand was changing hands at R13.408/$, a 0.22% gain over Tuesday's close.

Traders said the rand could come under renewed pressure as recent economic data pointed to a slowdown both at home and in China, a key importer of South African commodities.

The economy contracted in the second quarter of 2015 and a report from the Trade and Industry Department on Tuesday showed new vehicle sales contracted 8.2% in August, the latest sign of continued stress.

READ: Rate hike, rand rout hit new car sales

Relatively buoyant US data, on the other hand, has strengthened the case for policy tightening to resume as early as September in the world's biggest economy, drawing investment away from emerging markets.

"Today we get the ADP private payroll release (and) if it is more positive than expectations, I think the continuation of the recent dollar bull move, especially against EM currencies, will continue," Standard Bank trader Warrick Butler said, referring to private sector employment numbers due out of the United States.

"From a rand perspective this will mean a continuation of this onward and upward (weaker) trend."