* Shoprite strikes 2-month high after merger collapse
* Banks down as rand-rigging probe weighs
* Rand recovers early losses, down 0.1 pct (Adds latest prices, analyst comment)
JOHANNESBURG, Feb 20 (Reuters) - South African stocks snapped a four-session losing streak on Monday, buoyed by retailers Steinhoff SNHJ.J and Shoprite SHPJ.J which announced they had scrapped their plan to merge after failing to agree on a price.
Shoprite rose 8.6 percent to hit a 2-month high of 188 rand ($14.41) and Steinhoff advanced 5 percent to 70.11 rand. Investors had been unnerved by the lack of detail surrounding the proposed exchange ratio. Shoprite there has been a major overhang around this acquisition for a very long time and I think it will free up any uncertainties," said Paul Chakaduka at Global Trader.
The benchmark Top-40 index was up 1 percent at 45,506 points, while the All-share climbed 0.6 percent to 52,558.
Banks weighed on the bourse with the banking index .JBANK shedding 0.6 percent as investors continued to digest the competition watchdog's recommendation that banks should be fined for rigging the rand currency. the currency market, the rand edged lower, weighed down by renewed fears of a cabinet reshuffle ahead of Finance Minister Pravin Gordhan's budget speech on Wednesday.
By 1500 GMT the rand ZAR=D3 had pared back earlier losses to trade 0.1 percent weaker at 13.0650 per dollar, as stronger commodity prices and investors seeking higher rewards lifted demand for emerging currencies.
However, there was caution in the market ahead of speeches by U.S. Federal Reserve policymakers due later this week, with investors awaiting further clues on the timing of U.S. interest rate hikes.
Gordhan is expected to announce plans to lower the fiscal deficit, including new taxes to plug a revenue shortfall caused by low economic growth.
"Fiscal consolidation tends to put downward pressure on inflation, making it more likely that the Reserve Bank will consider interest rate cuts, a further positive for domestic bonds," said investment strategists at Old Mutual Dave Mohr and Izak Odendaal in a note.
Bonds were weaker, with yields on the benchmark paper due in 2026 adding 10.5 basis points to 8.785 percent. ZAR186= ($1 = 13.0503 rand)