JOHANNESBURG (Reuters) -- South Africa's yawning current account gap has spooked investors and mixed messages from the country's monetary and fiscal authorities may be adding to the problem.

The central bank has repeatedly warned about the impact of the deficit on the rand and inflation, while the Treasury has played down the risks, saying solid economic fundamentals cushion any potentially adverse effects.

"It is (a mixed message) but I would say they are simply looking at it from two different perspectives," Paul Guest, economist at Moody's Economy.com, told Reuters.

Other analysts say the divergent views confuse the market.

"It is clearly a mixed message. They (the Treasury) are trying to play it down and I think that will do more damage in the long term," said NKC economist Noelani King Conradie.

"I think (central bank governor) Tito (Mboweni) is right to flag it and I don't think the market is over-reacting," she said.

The rand sank more than two percent against the dollar on Monday after Mboweni repeated his frequent warning of the risks posed by a current account shortfall of more than 6 percent of gross domestic product -- a two-decade high.

Meanwhile National Treasury Director General Lesetja Kganyago told Reuters this week that the market reaction to the deficit warning was "baffling" given solid economic fundamentals, including a planned budget surplus, while the current account deficit had narrowed.

The deficit shot up to 6.4 percent in the first quarter of 2006 from 4.5 percent previously, easing only slightly to 6.1 percent in the second quarter.

This has weighed heavily on the rand which has lost about 15 percent of its value against the U.S. dollar this year, though the currency has rebounded from a 3-1/4 year trough of 7.98 to the greenback hit earlier this month to about 7.42 per dollar.

Traders say as long the gap looms large, downward pressure on the rand will remain.

Kganyago says while the deficit must be watched carefully, South Africa's growing foreign reserves and the government's prudent fiscal policies cut the external risk to its financing.

"I would not lose sleep over the sustainability of the flows," he told parliament's finance committee this week, after the Treasury had announced deficit forecasts of around 5.5 percent for the coming three years.

So far the deficit has been more than financed by portfolio inflows, allowing foreign reserves to swell, but those investments are at the whim of global financial developments and could quickly dry up.

Foreigners bought 63.5 billion rand (U.S.$8.5 billion) worth of shares in the year to October 20, some 44 percent higher than in the same period a year ago, according to figures from the JSE Securities Exchange.

A reversal of that flow would make life tough for a government trying to finance a current account deficit that stood at 101.7 billion rand in the second quarter of the year.

"To me it is a concern. It is traveling significantly north of 3 percent, if we don't turn it around we are not going to get good points from the ratings agencies," Brait Merchant Bank economist Colen Garrow said.

"Maybe this is the reason why the Treasury is down playing the risk," he said, referring to South Africa's investment grade ratings. The main rating agencies have all singled out the shortfall as a concern.

The Treasury's stance appears to contradict the central bank's worries over the impact of the deficit on inflation.

Mboweni has been consistent in flagging the risk of a shortfall and the consequential threat posed to the currency, inflation and interest rates.

The Reserve Bank has already hiked its repo rate by 150 basis points in three stages since June, and most analysts expect more to come.