Rand gains as risk aversion ebbs

Good Start to week !!

Johannesburg - The rand gained more than 2.3% against the dollar on Monday, the best performance in a basket of 20 emerging market currencies monitored by Reuters, as the currency tracked recovering global markets.The government has said South Africa's economy will not escape unscathed from the eurozone debt crisis, but Finance Minister Pravin Gordhan said in a statement released on Monday continued exchange control liberalisation would encourage greater two-way demand for the rand, mitigating its volatility.The currency was at R8.34 to the greenback in midday trade after earlier touching a near-week high of R8.3290.It was off last week's low of 8.61, the weakest it has been since mid-May 2009, as investors offloaded assets seen as risky on worries eurozone leaders are failing to get a handle on the region's debt woes."After last week's risk aversion, the market is grabbing at any headlines that may offer some positive thoughts - as we saw with the IMF/Italy news," said Anisha Arora, emerging market analyst at 4CAST, adding the moves were based on thin trading volumes.The rand tracked a rally by the euro on a media report of an International Monetary Fund aid package for Italy which was, however, later quashed by the global lender."Liquidity is playing a big part. Across the emerging region liquidity is thin, and hence while dollar/rand moves reflect the market's current sentiments, thin liquidity is also exaggerating rand relief," Arora said.The dollar had taken a beating overnight as European sentiment improved ahead of a summit of eurozone finance ministers on Tuesday, said Brigid Taylor, head of institutional sales at Nedbank."US Treasuries and the dollar have retreated as equities, oil, gold and risk look better this morning," Taylor said.