Johannesburg - The rand is expected to take its direction
from a slew of month-end data due this week but the currency is expected to
remain on the defensive due to a wider budget deficit and recent credit rating
downgrades.
The rand was at R8.6619 to the dollar at 06:08 GMT, 0.3%
weaker than Friday’s New York close.
The releases expected this week include September trade data
on Wednesday, unemployment and manufacturing figures on Thursday and vehicle
sales statistics on Friday.
“ZAR participants should be eager to see the outcome of
local trade and PMI (manufacturing) data, because if either of these show
further deterioration, the ZAR could weaken due to the negative GDP
implications,” Absa Capital analysts said in a note.
Structural factors, such as a wider budget deficit, are
expected to weigh on the rand in the coming months and analysts said recent
downgrades by Moody’s and Standard and Poor's may not be the last.
In an interim budget last week, Finance Minister Pravin
Gordhan trimmed South Africa's 2012 growth forecast to 2.5%, from 2.7% seen
earlier in the year, citing the impact of strikes on the mining sector.
The Treasury also raised the projected 2012/13 budget
deficit to 4.8% of GDP, from a previous forecast of 4.6%.
“If you ask me where the general risks for the rand lie I
would say more in favour of a weaker rand than a stronger rand,” said George
Glynos, managing director at ETM.
“The structural factors...probably will weigh on the rand
over the course of the next few months.”
Government bonds were mixed, with the yield on the 3-year
paper steady at 5.94% and that on the 14-year bond <ZAR 186=> up 2.5
basis points at 7.795%.
South Africa’s 2048 bond is set to be included in Citi’s
World Government Bond Index from 31 October, the bank said in a note. This will
increase the weight of South Africa in the index from 0.425% to 0.431%.
South Africa joined the influential WGBI, a benchmark
tracked by billions of dollars globally, on October 1.