Rand fragile as current account gap widens

Johannesburg - The rand stayed on the back foot against the dollar early on Wednesday, a day after Reserve Bank data showed a wider-than-expected current account deficit.

By 09:11 the rand was at R15.2850/$, little changed from its New York close at R15.3040/$ in the previous session.

The local currency fell as much as 1.5% to its weakest in more than a week on Tuesday after the South African Reserve Bank said the current account deficit widened to 5% of GDP in the first quarter of this year from 4.6% in the fourth quarter of last year.

READ: Pressure grows as SA's current account gap widens

Government bonds edged higher, and the yield for the benchmark instrument maturing in 2026 eased 3 basis points to 9.17%.

South Africa relies heavily on portfolio flows to plug its current account shortfall, making the rand more vulnerable than its emerging market peers when risk appetite wanes.

READ: Rand dives as current account stays stubbornly wide

"Local data this week has not provided any comfort for the local unit and this, long with markets bracing for a number of significant events, has seen the rand remain firmly under pressure," Nedbank said in a market commentary.

Traders and analysts said markets were focused mainly on the US Federal Reserve's policy meeting later on Wednesday, while the prospect of Britons voting to leave the European Union at a June 23 referendum had dampened risk appetite.

On the equity market, the JSE's All-share index was up 1% in early trade, while the benchmark Top 40 index added 0.9%.