* Investors in wait and see mode on Zuma's fate
* Rand volatile, briefly touches one pct
* Stocks recover from over-sold levels
(Adds stocks, trader comment)
JOHANNESBURG, Feb 12 (Reuters) - South Africa's rand briefly traded one percent firmer on Monday after local media reported that President Jacob Zuma had agreed to step down, before surrendering those gains after the presidential spokesman dismissed the reports as "fake news".
At 1500 GMT the rand was 0.6 percent at 11.9275 per dollar, having gained as far as 11.8800 moments earlier after a reporter from the state broadcaster the SABC, citing confidential sources, said Zuma had agreed to step down.
Presidency spokesman Bongani Ngqulunga dismissed the report as "fake news", and the rand subsequently gave back gains to near where it had been trading before the report. "The market is waiting for some clarity on this matter, and amid all of this uncertainty and news flow the rand will continue to be volatile," said ETM Analytics market analyst Halen Bothma.
The rand's fortunes have been closely tied to political outcomes over the past couple of years, with the currency rallying on any sign of an end to the corruption scandals and economic decline that have tainted Zuma's time in office.
Bonds gained on the reports of news of Zuma's resignation, with yield on the benchmark paper due in 2026 cutting 10 basis points to 8.39 percent.
Bets around Zuma's exit also saw the risk premium on the rand increase, with implied volatility on the one-week and one-month options jumping to their highest since Cyril Ramaphosa's elections as ANC chief.
"Looking at the JSE's mark-to-market data, we're seeing a number of puts ... and if one has puts listed it's usually someone buying puts so it seems the market's expecting the currency to strengthen," said derivative specialist Gillian Van Heerden.
On the equities market, stocks started the new week on a more stable footing following a sell-off last week that saw major indexes hit levels last attained in October 2017.
The Johannesburg All-Share index rose 0.54 percent to 56,206 points, while the Top-40 index climbed 0.52 percent to 49,554 points.
"We're just coming off over-sold levels," said BP Bernstein trader Vasili Girasis. "The volatility is still here to stick around, the market has been over-sold quite heavily."
Banks , which usually react to political developments, were among the top gainers, with that index up 2.35 percent as investors awaited Zuma's fate as the president of South Africa.
RCL Foods rose 1.71 percent to 17.29 rand after it flagged an up to 66 percent rise in half-year headline earnings per share. (Reporting by Nqobile Dludla and Mfuneko Toyana; Editing by William Maclean)
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