Rand gains ground against the dollar after fiscal consolidation in Budget

JOHANNESBURG – The rand firmed 0.7 percent to R15.14 on Wednesday as investors cheered the government’s commitments to rein in spending in an effort to contain the ballooning Budget deficit.

The local currency recovered slightly from trading at R15.25 against the dollar before Finance Minister Tito Mboweni’s Budget Speech to exchange hands at R15.14  by 5pm.

Analysts said Mboweni’s fiscal consolidation had been received well by the markets. They said Mboweni’s cost-cutting reforms would likely preserve South Africa’s last remaining investment grade status by Moody’s.

FXTM’s senior research analyst Lukman Otunuga said sentiment towards the economy brightened slightly after Mboweni’s speech. Otunuga said a key takeaway was Mboweni’s confidence that the 2020 Budget would not warrant a Moody’s downgrade in March. 

“This sense of hope over South Africa avoiding a credit downgrade has re-energised the rand, with the local currency appreciating roughly 0.7 percent against the dollar and G10 majors,” he said.

Source: iol.co.za