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FX ALERT: USDZAR breaks through 11.00

Rand hits fresh seven-month lows

South Africa's rand extended recent losses to a fresh seven month low against the dollar on Monday, and was expected to remain under pressure ahead of inflation data and the central bank's rate decision later in the week.

The rand has weakened more than 2 percent over the past week, reflecting a stronger dollar as investors bet on the U.S. Federal Reserve tightening policy sooner than earlier expected.

The rand hit a trough of 11.0690, its softest since Feb 20, and was at 11.0665 by 0650 GMT, down 0.5 percent from Friday's close in New York.

Government bonds weakened alongside the currency, pulling the yield on the 2026 benchmark 3 basis points higher to 8.29 percent.

The South African Reserve Bank's policy statement on Thursday will be key, with the majority of economists polled by Reuters expecting the benchmark repo rate to stay on hold at 5.75 percent after a 25 basis point increase in July.

This could weigh on the rand, particularly if the U.S. Federal Reserve issues a hawkish statement on Wednesday. South African inflation numbers are due the same day.

"After the recent strong (U.S.) data and hints from policy makers, there is a chance that the Fed might change its guidance on when it will raise rates," Rand Merchant Bank analyst John Cairns said.

"If they do, expect a push higher in U.S. yields and a push stronger in the dollar - and significant rand weakness."

15 September 2014 (Reuters) (Reporting by Stella Mapenzauswa; Editing by Joe Brock)
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