Johannesburg - The rand weakened against the dollar on Thursday, a day after the finance minister warned that South Africa's economy was not making sufficient progress to reduce poverty and create jobs.
In his maiden mid-term budget speech, minister Nhlanhla Nene downgraded South Africa's growth forecast for the next three years, saying the economy would only grow by 1.4% in 2014 compared to the 2.7% predicted by the ministry in February.
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The rand rallied below the crucial R11.000 against the greenback following the budget speech, closing at R10.9970 in New York, before easing back 0.12% to R11.0100 by 08:14 on Thursday.
Yields on government bonds dropped to seven-week lows shortly after Nene told parliament that the budget deficit for 2014/15 was now seen at 4.1% of GDP, well below a Reuters poll anticipating a 4.4% gap.
The yield on the benchmark government issue due in 2026 was flat at 7.895% in morning trade, after shedding 12.5 basis points in the previous session.
"While the MTBPS (budget speech) sent the correct message to the market, weaker than anticipated growth could result in higher gross government debt levels," Rand Merchant Bank analyst Mamello Matikinca said in a note.