File picture: Denis Farrell
File picture: Denis Farrell

Rand vulnerable to more weak data

Time of article published Jun 17, 2014

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Johannesburg - South Africa's rand was largely flat against the dollar on Tuesday, but could come under pressure ahead of the Reserve Bank's latest quarterly bulletin, which is expected to show a sizeable widening of the current account deficit.

The rand remains vulnerable to negative domestic news after falling as much as 1.3 percent on Friday when agency Fitch cut its outlook for South Africa while Standard and Poor's downgraded its rating outright.

South African markets were closed on Monday for a public holiday.

At 06h44 GMT the rand was trading at 10.7610 to the dollar, barely shifted from Monday's offshore close in New York at 10.7565.

Friday's downgrades reflected the ratings agencies' concerns about the poor prospects for Africa's most advanced economy, which contracted in the first quarter of the year mainly due to a platinum strike now in its fifth month.

The leader of labour union Amcu indicated last week that a deal to end the strike was imminent but miners and platinum producers have not yet reached an agreement.

“The rand remains vulnerable to South Africa's weak fundamental backdrop over the medium term,” Barclays Africa said in a note. “The fact that the reported wage deal in the platinum sector has yet to be signed also detracts from a rand recovery.”

The Reserve Bank's quarterly bulletin due out on Wednesday could deal another blow to the currency, with economists polled by Reuters expecting it to show the current account deficit widened to 6.1 percent of GDP in the first quarter from 5.1 percent.

Government bonds were slightly down in early Tuesday trade and yields for the benchmark 2026 and 2015 issues each added 1 basis point to 8.25 percent and 6.7 percent respectively. - Reuters

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