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Johannesburg - The rand fell to a new four-year low on Tuesday morning on news that the country’s current account deficit was slightly worse than expected in the fourth quarter of last year.
Immediately after the current account data was released‚ the rand dropped to R9.21/$.
The reserve bank’s quarterly bulletin showed that the current account deficit came in at R212bn‚ or 6.5% of GDP‚ worse than the market expectation.
A survey of eight leading economists by I-Net Bridge had forecast a current account deficit of 6.4% of GDP in the fourth quarter.
“This was far worse than expectation of a deficit of R196bn and sparked a selloff in the rand‚” said Mark Kalkwarf‚ a senior portfolio manager at the Iquad Group.
By late morning the rand had retraced some of its earlier losses and was trading at about R9.17/$.
“The previous third quarter data of a deficit of R202.5bn was revised to a deficit of R215bn‚ thus making the fourth quarter data slightly better than the revised third quarter data‚ but it remains a huge number and way worse than expectations‚” said Kalkwarf.
Kalkwarf said the domestic currency was likely to remain on the back foot for some time to come as the combination of poor economic data and ongoing labour issues continue to add to bearish sentiment.
“An issue for investors going forward will be how easily the current account deficit will be financed in the future‚” he said.
In order to finance the increasing gap on the current account‚ SA will have to attract an increased quantity of foreign inflows‚ however there are concerns over the sustainability of this approach‚ specifically when foreign holdings of SA equities will become saturated.
Stanlib chief economist Kevin Lings warned in a note last week that in an environment of negative labour market news and SA’s recent credit ratings’ downgrades‚ foreign capital flows are becoming less assured.
At 11:33 the rand was bid at R9.1726/$ from R9.1057/$ at Monday’s close.
The local currency was bid at R11.9336/€ from its previous close of R11.8664/€ and at R13.6236 against sterling from R13.5648 before.
The euro was bid at $1.3009 from $1.3032 at Tuesday’s close.
Immediately after the current account data was released‚ the rand dropped to R9.21/$.
The reserve bank’s quarterly bulletin showed that the current account deficit came in at R212bn‚ or 6.5% of GDP‚ worse than the market expectation.
A survey of eight leading economists by I-Net Bridge had forecast a current account deficit of 6.4% of GDP in the fourth quarter.
“This was far worse than expectation of a deficit of R196bn and sparked a selloff in the rand‚” said Mark Kalkwarf‚ a senior portfolio manager at the Iquad Group.
By late morning the rand had retraced some of its earlier losses and was trading at about R9.17/$.
“The previous third quarter data of a deficit of R202.5bn was revised to a deficit of R215bn‚ thus making the fourth quarter data slightly better than the revised third quarter data‚ but it remains a huge number and way worse than expectations‚” said Kalkwarf.
Kalkwarf said the domestic currency was likely to remain on the back foot for some time to come as the combination of poor economic data and ongoing labour issues continue to add to bearish sentiment.
“An issue for investors going forward will be how easily the current account deficit will be financed in the future‚” he said.
In order to finance the increasing gap on the current account‚ SA will have to attract an increased quantity of foreign inflows‚ however there are concerns over the sustainability of this approach‚ specifically when foreign holdings of SA equities will become saturated.
Stanlib chief economist Kevin Lings warned in a note last week that in an environment of negative labour market news and SA’s recent credit ratings’ downgrades‚ foreign capital flows are becoming less assured.
At 11:33 the rand was bid at R9.1726/$ from R9.1057/$ at Monday’s close.
The local currency was bid at R11.9336/€ from its previous close of R11.8664/€ and at R13.6236 against sterling from R13.5648 before.
The euro was bid at $1.3009 from $1.3032 at Tuesday’s close.
