Trade Deficit Latest in String of Bad News Buffeting the Rand

JOHANNESBURG (Capital Markets in Africa) – The rand slumped to a three-week low against the dollar, leading emerging-market currency declines, as an unexpected monthly trade deficit added to a string of disappointing economic news making investors wary of South African assets.

The currency of Africa’s most-industrialized economy declined 1.6 percent to 14.8307 per dollar by 4:18 p.m. in Johannesburg, heading for the weakest closing level since October 8. Yields on benchmark 2026 government bondsjumped nine basis points to 9.35 percent.

The September trade deficit, which surprised analysts after the previous month’s surplus, suggested that South Africa’s export sector hasn’t been able to capitalize on the rand’s 16 percent slump this year. It came after the Treasury said the fiscal shortfall and government debt will overshoot targets over the the next three years as the country struggles to emerge from a first-half recession.

“The series of bad news out of South Africa is not abating,” Bernd Berg, a foreign-exchange strategist at Woodman Asset Management AG in Zug, Switzerland. “First, an unexpected recession at the beginning of the year, then government turmoil, lately a deteriorating outlook for the fiscal position and on top of all weak economic data like today’s trade data. I continue to be negative on the rand and expect an underperformance against EM peers.”

Source: Bloomberg Business News