The rand was significantly weaker on Thursday morning‚ signalling investors’ concern about the precarious state of SA’s finances‚ which were laid bare during Finance Minister Malusi Gigaba’s medium-term budget policy statement on Wednesday.
The local currency bought a single dollar at close to R14.20‚ its weakest level in about a year — a development that potentially closes the window for the Reserve Bank to cut interest rates later in the year.
It was by far the worst-performing currency against the dollar out of 19 emerging-market currencies ranked by Bloomberg.
The medium-term budget also revived concern that rating agencies could downgrade the country’s debt rating as soon as November‚ when they are scheduled to announce their reviews.
The substantially weaker rand and bonds suggested investors were pricing in the likelihood of a sovereign rating downgrade.
The yield on benchmark R186 rose to its highest in a year.
Gigaba said revenue in the 2017-18 financial year was projected to fall short by R50.8bn and spending to increase by R3.9bn — both higher than markets had expected.
The breach of the expenditure ceiling was largely due to the bail-out of embattled state-owned enterprises‚ including South African Airways (SAA) and the South African Post Office (Sapo).
“The odds have swung heavily in favour of the ‘junk status’ tag and foreigners expressed their concerns by dumping in excess of R5bn worth of bonds‚” said Ashley Dickinson‚ head of fixed income dealing at Sasfin Wealth.
The bleak picture of the country’s finances comes amid political uncertainty as the ANC heads to its conference in December to choose a successor to President Jacob Zuma.
At 9.37am on Thursday‚ the rand was R14.1984 to the dollar from Wednesday’s R14.0502‚ R16.7823 to the euro from R16.5850 and to R18.8015 to the pound from R18.6180.
The euro was at $1.1820 from $1.1804.
- BusinessLIVE
Rand plummets another 14c as market digests Gigaba speech
The local currency bought a single dollar at close to R14.20‚ its weakest level in about a year — a development that potentially closes the window for the Reserve Bank to cut interest rates later in the year.
It was by far the worst-performing currency against the dollar out of 19 emerging-market currencies ranked by Bloomberg.
The medium-term budget also revived concern that rating agencies could downgrade the country’s debt rating as soon as November‚ when they are scheduled to announce their reviews.
The substantially weaker rand and bonds suggested investors were pricing in the likelihood of a sovereign rating downgrade.
The yield on benchmark R186 rose to its highest in a year.
Gigaba said revenue in the 2017-18 financial year was projected to fall short by R50.8bn and spending to increase by R3.9bn — both higher than markets had expected.
The breach of the expenditure ceiling was largely due to the bail-out of embattled state-owned enterprises‚ including South African Airways (SAA) and the South African Post Office (Sapo).
“The odds have swung heavily in favour of the ‘junk status’ tag and foreigners expressed their concerns by dumping in excess of R5bn worth of bonds‚” said Ashley Dickinson‚ head of fixed income dealing at Sasfin Wealth.
The bleak picture of the country’s finances comes amid political uncertainty as the ANC heads to its conference in December to choose a successor to President Jacob Zuma.
At 9.37am on Thursday‚ the rand was R14.1984 to the dollar from Wednesday’s R14.0502‚ R16.7823 to the euro from R16.5850 and to R18.8015 to the pound from R18.6180.
The euro was at $1.1820 from $1.1804.
- BusinessLIVE
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