Rand largely stable as market adopts wait-and-see approach ahead of Mboweni's Budget
DURBAN – The rand remained relatively stable just one hour ahead of Finance Minister Tito Mboweni’s much-awaited Emergency Budget Speech set for 3pm.
At 2:55pm the rand was R17.31 against the dollar, R21.60 against the pound and R19.51 against the euro.
Thus far, the domestic currency ranged between R17.18 and R17.35.
The University of KwaZulu-Natal’s School of Accounting, Economics and Finance economist Dr Ntokozo Nzimande said the moment everyone has been waiting for had finally come.
“It appears that the financial markets are using what is referred to as the wait-and-see approach. If this is the case, the reaction of the markets will only be realised after the budget has been delivered,”
Nzimande said, for now, everyone was waiting what the minister would have to say. More attention will be paid on the measure to curtail the mounting government debt and deficit and most importantly, on what the minister will have to say about state-owned entities.
Nedbank CIB research analyst Reezwana Sumad said the rand had over the most recent sessions continued to post gains, despite the impending budget speech today, which was likely to sketch a scenario of significantly challenging times ahead for South Africa.
“The overnight sessions were again subdued, this morning, in the Far East session, in limited liquidity, the rand traded marginally firmer,” said Sumad.
The rand edged up on Tuesday as risk appetite improved after President Donald Trump offered reassurance that a U.S. trade deal with China was on track, quelling market concerns that Washington may be ditching the agreement.
“Given how the emergency budget has little fiscal space to manoeuvre, Mboweni is walking on the tightest of ropes,” Lukman Otunuga, senior research analyst at FXTM, said in a note.
“Whatever the outcome of the speech tomorrow, it will certainly have an impact on the South African rand which has slightly gained against the dollar today.”
Additional reporting by Reuters.