Nervous rand on the back foot ahead of Tito Mboweni's Budget 2020
CAPE TOWN – The rand weakened/strengthened against the dollar ahead of Finance Minister Tito Mboweni’s 2020 National Budget Policy Statement and the nervous tension in the market is palpable.
TreasuryONE senior dealer Andre Botha said the domestic unit could be in for a seesaw day as analysts wait to see if Mboweni would manage to deliver a positive budget and avert further downgrades from the rating agencies.
Just moments before Mboweni “tightrope performance”, the domestic currency had given up more than 10 cents from it Tuesday 5pm bid of R15.21 a dollar. At 1:45pm the rand was trading at R15.25 to the greenback from R15.23 at the market opening.
Overnight the rand was on the back foot as it moved to test R15.25 a dollar, as the Covid-19 virus continues to damage market sentiment, according to Bianca Botes, Treasury Partner at Peregrine Treasury Solutions.
“We expect volatility throughout the day, with large moves and a bias towards weakness. While currency markets remain volatile, with emerging markets bearing the biggest brunt of activity, equity markets have shed 5 percent in just two days,” she said.
Analysts said the speech would provide guidance on whether the government had been able to rein in spending and introduce fundamental macroeconomic reforms that could revive the country’s economy.
Mboweni is expected to announce the implementation of the National Treasury’s strategy to revive the economy as growth is expected to be about 0.5 percent. He is also expected to reveal measures to address the electricity and fiscal crises, and rein in expenditure by cash-strapped state-owned enterprises.
Moody’s has flagged that it was unsustainable for South Africa to use borrowings to supplement its servicing of current expenditure, including debt servicing costs. The ratings agency is expected to announce its decision on the country’s review at the end of March.
South African markets closed in the red on Tuesday, pulled down by losses in gold and platinum mining sector stocks. The JSE All Share was marginally down as investors look forward to today’s budget.