Rand snaps two-day gain before budgetComment on this story
Cape Town - The rand declined for the first time in three days before Finance Minister Pravin Gordhan presents his annual budget this week amid concern flagging growth is undermining fiscal targets.
Gordhan will probably cut his 2014 gross domestic product growth forecast to 2.6 percent in a budget speech on February 26, from 3 percent predicted in October, according to the median estimate of 28 economists surveyed by Bloomberg.
The Treasury is under pressure from credit-rating companies to narrow the budget deficit and limit debt growth as the ruling African National Congress campaigns for elections scheduled for May 7.
“The fiscal stance is probably most relevant for the rand via any consequences it has for perceptions of creditworthiness and thus debt ratings,” Bruce Donald, a currency strategist at Standard Bank Group Ltd. in Johannesburg, said in a client note.
South Africa’s currency declined 0.3 percent to 10.9578 per dollar by 10:48 a.m. in Johannesburg.
Yields on rand bonds due December 2026 climbed one basis point, or 0.01 percentage point, to 8.62 percent.
Africa’s largest economy grew 1.9 percent in 2013, according to government forecasts, the slowest pace since a 2009 recession, as a slump in global demand and strikes in mining and manufacturing curbed exports.
A report tomorrow will probably show growth accelerated to 3.5 percent in the fourth quarter, the median estimate of 20 economists in a Bloomberg survey shows.
South Africa’s credit rating was downgraded by Fitch Ratings Ltd, Moody’s Investors Service and Standard & Poor’s between September 2012 and January 2013 as growth slowed and debt increased.
Standard & Poor’s and Moody’s have a negative outlook on the rating, indicating the risk of further cuts.
International investors sold a net 593 million rand ($54 million) of South African bonds on February 21, bringing outflows for the week to 1.7 billion rand, according to JSE Ltd. data. - Bloomberg News