South African rand coins are seen in this photo illustration , file.REUTERS/Mike Hutchings/File Photo

South Africa’s rand retreats as 2nd wave fears dent risk demand

South Africa’s rand fell early on Wednesday, giving back some of the gains from the previous session as demand for the U.S. dollar stepped up again, boosted by positive economic data and its renewed safe-haven appeal.

At 0630 GMT the rand was 0.54% weaker at 16.8650 per dollar compared to an overnight close of 16.7750 following volatile trade as fears of a second wave of coronavirus infections in the United Kingdom and Europe unnerved investors.

Concerns about South African treasury’s bailout for the state airliner SAA also contributed to rand’s wild swings on Tuesday. The currency rallied to a session-best 16.5600 before backtracking to 16.9700, with the high-yield appeal of the currency unable to withstand a souring global mood and mounting fiscal risks.

After Britain announced it would impose localised lockdowns in cities showing a resurgence of COVID-19 infections, France and Spain also signalled fresh measures to curb the disease as the Northern Hemisphere entered the winter season.]

That put the skids on a relief rally by risk assets following a blow out earlier in the week. Simmering tensions between the United States and China added to risk aversion, while dollar buying was encouraged by U.S. home sales surging to their highest level in nearly 14 years.

With no major economic releases and local markets closed for a holiday on Thursday, traders said liquidity would be low in the session, likely keeping the rand in a tight range.

Bonds kicked off the session weaker, with the yield on the benchmark 2030 government issue up 2.5 basis points to 9.44%.

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