South Africa’s rand hits firmest since July, stocks flat

At 1500 GMT the rand was 0.92 percent firmer at 12.8925 per dollar, its firmest since July 27, rising in line with fellow emerging currencies as soft U.S. jobs data further diminished bets of rate hikes by the Federal Reserve.

The currency was unmoved by subsequent domestic data showing a 6.7 percent increase in new vehicle sales in August, with traders warning that a recent widening of the government’s budget deficit signalled a larger than estimated headline deficit.

“The budget statistics are troubling. If you look at how the rand reacted when those numbers came out, it took them in its stride but it leaves our domestic outlook looking even worse,” said Standard Bank senior trader Oliver Alwar.

National Treasury is facing a sharp funding crunch with weak growth, lower tax revenues and bailout to state firms expected to stretch the budget deficit past 4 percent of GDP, upping the likelihood of another round of credit downgrades.

“We think there is a budget hole of around 50 billion rand for this fiscal year, which is higher than our previous estimate of 30 billion rand,” said Nomura analyst Peter Attard Montalto.

Statistics South Africa publishes second quarter economic growth data on Tuesday. Bonds also firmed, with the yield for the benchmark government bond due in 2026 down 6.5 basis points 8.505 percent. Stocks were flat, with gains constrained in part by technical factors after the main indices scaled record peaks a week ago and then lost ground with momentum indicators tracked by analysts suggesting the market was overbought.

The benchmark Top-40 index was almost unchanged at 49,996.40, remaining within striking distance of its record high of 50,418.72. The wider All-share index ended just 0.02 percent lower at 56,513.46.

Movers included no-frills retailer Mr Price, which climbed 3.45 percent to 187.50 rand after the company flagged an uptick in retails sales in the first four months of its financial year.