South Africa’s rand weakened on Thursday after a budget speech by the finance minister that failed to convince investors the country was on track to turn around its bleak growth prospects.
Stocks were set to open higher at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.8 percent.
At 0645 GMT, the rand had slipped 0.22 percent to 15.6295 per dollar, a one-week trough wiping out the unit’s recent rally to a two-month high.
Bonds regained recent momentum, with the yield on the benchmark paper due in 2026 down 10.5 basis points to 9.27 percent.
“What was obvious was that Pravin Gordhan had no ability to announce wider microeconomic structural reforms that will boost growth in the medium run and bring back investor confidence,” emerging markets analyst at Nomura Peter Attard Montalto said.
Early on Thursday, Finance Minister Gordhan told a conference that the treasury would impose more spending cuts if economic growth remained below 1 percent in the next two years.
Gordhan announced a package of spending cuts, public sector job freezes and moderate tax hikes on property sales, fuel and alcohol on Wednesday in a speech to convince investors and ratings agencies that the government could cut spending and boost growth.
But markets reacted adversely, with the currency tumbling more than 3 percent and bond yields spiking in the immediate aftermath.
“We never expected that the budget would be good enough to avoid a downgrade to junk. However, the government has perhaps bought some time,” said currency analyst at Rand Merchant Bank John Cairns.