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Rand eases as growth concerns linger

Feb 28 2013 09:05
Reuters

Johannesburg - The rand softened against the dollar on Thursday as investors worried about the government's ability to finance a wide budget deficit in the face of poor economic growth.

The rand was at R8.8425 against the greenback at 06:28 GMT, 0.27% softer than New York's Wednesday close of R8.8195.

"Probably closer to the truth is that there was nothing significantly new to either promote growth or reduce the budget deficit or tackle the unemployment rate," Tradition Analytics said in a note.

In his three-year budget tabled to parliament on Wednesday, Pravin Gordhan said the 2013 budget deficit would be 4.6% of GDP, a shade wider than his last forecast in October.

The deficit is a big decline from the 5.2% gap projected for 2012/13, but Gordhan was forced to cut this year's growth forecast once again to 2.7%.

Mirroring Gordhan's concerns about growth, the Reserve Bank said on Thursday demand for credit by South Africa's private sector slowed to 8.64% year-on-year in January, compared with a 10.0% rise in December.

After Wednesday's budget speech, selling of longer-dated paper was more pronounced, showing investors are worried about the government's plans to finance its yawning budget gap.

The yield on the three-year bond added 2 basis points to 5.28% and that on the 2026 bond inched up 0.5 basis points to 7.3%.  

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2013 budget speech  |  pravin gordan  |  markets  |  sa budget  |  bonds  |  rand

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