JOHANNESBURG Oct 29 (Reuters) – The rand weakened against
the dollar on Monday, pressured by debt crisis concerns in the
euro zone, South Africa’s biggest trading bloc, and worries
about a wider domestic budget deficit.
Finance Minister Pravin Gordhan projected last week a wider
budget shortfall for this year, while lower growth forecasts
combined with a further delay in consolidating the budget are
expected to weigh on the market for some weeks.
The rand ZAR-D3, which has traded in a 8.60-8.80/dollar
range in the last week, weakened within that range to 8.70 by
1607 GMT. It closed at 8.64 in New York on Friday.
Increasing South Africa’s debt stock, as laid out in the
country’s interim budget on Thursday, adds pressure to the
country’s credit rating, which has already been cut by Moody’s
and Standard and Poor’s in the last month.
Adding pressure to the local currency was lack of U.S.
interest because markets there were closed by Hurricane Sandy.
“As long as there are concerns over the euro zone, Greece
and Spain, and while focus is on Hurricane Sandy’s impact on the
markets and the economy, it seems there is an adverse global
backdrop,” said Anisha Arora from 4Cast.
Arora added that a break of last Wednesday’s 8.82 rand was a
key level to watch.
Gordhan has pushed out his goal of a near-3 percent budget
deficit from 2013/14 announced two years ago to 2015/16
announced last week.
Fitch ratings agency, the only agency yet to cut South
Africa’s credit rating said “failure to deliver projected fiscal
consolidation continues to erode one of the sovereign’s key
rating strengths compared with its peers,” which was part of the
company’s decision to put South Africa on negative watch in
January.
The market had priced in increased debt issuance. However
Gordhan said he would plug the gap partly by drawing down on
government’s cash reserves.
Yields on government bonds ended up 1 basis point on the
three-year note at 5.49 percent and steady at 7.77
percent on the 14-year paper, with trade volumes thin
while the U.S. market was closed.
(Reporting by Xola Potelwa. Editing by Jeremy Gaunt.)
