Weak S.Africa fundamentals to keep rand gains in check

by Reuters 0

South Africa’s rand edged higher against the dollar on Monday but was within easy reach of recent 3-1/2 week lows and remained vulnerable to a gloomy outlook for the domestic economy and growth in key commodity consumer China.

The JSE securities exchange’s Top-40 futures index slid 0.8 percent, suggesting the local bourse would open more than 400 points lower at 0700 GMT.

By 0646 GMT the rand was trading 0.58 percent firmer at 13.7460 to the greenback compared with last Friday’s close in New York.

This was despite a slide in Asian markets – which tend to set the tone for the local currency – soft Chinese factory surveys stoked global growth concerns

The rand however remains on shaky ground after Finance Minister Nhlanhla Nene’s medium term budget policy statement (MTBPS) last month, which signalled lower economic growth and a widening in the budget deficit.

“Ever since the MTBPS … the rand has really struggled. Hardly surprising especially in light of a credit rating review due in December,” Standard Bank trader Warrick Butler said, alluding to an upcoming review by ratings agency Fitch.

“The rand’s latest demise has also not been helped by the general malaise of the Chinese economy,” he added, referring to South Africa’s heavy reliance on commodity exports to the world’s second-largest economy.

In fixed income, the yield on debt maturing in 2026 dipped half a basis point to 8.335 percent.