Rand takes a knock after disappointing current-account data

The rand lost ground in mid-morning trade, coinciding with data showing that SA’s current-account shortfall widened more than expected in the first quarter.

The deficit in the current account, which broadly indicates SA’s trade with the rest of the world, widened to 4.8% of GDP in the three months to March, from 2.9% in the preceding quarter. The Bloomberg consensus was for a deficit of 3.9%.

Capital Economics analysts said in an e-mailed note to clients that the deficit, which is the biggest in two years according to Bloomberg, helped explain why the rand has been vulnerable to shifts in global sentiment.

The value of the rand has dropped significantly over the past three months, as the prospect of high interest rates in the US drives investors into dollar-denominated assets.

Earlier this week, the rand came within a whisker of R14 to the dollar for the first time since late November, as trade tensions between the US and China knocked investor sentiment. The world’s two largest economies have locked horns over trade tariffs, leaving markets wondering about the potential implications on the broader global economy.

Stanlib economist Kevin Lings said in a tweet that the rand could remain under pressure if talk of a trade war continued. The developments came as the EU joined Canada and Mexico in announcing retaliatory measures against the US, which had earlier imposed tariffs on their steel and aluminium.

The weaker rand, along with higher international prices, have contributed to recent increases in oil prices. More fuel price increases, which could increase inflation, are in store for July according to the Automobile Association, which has forecast petrol to rise by 32c a litre and diesel 30c a litre.

Local bonds held steady, though, in mid-morning trade, with the yield on the benchmark R186 fetching 9.025%, from 9.010% on Wednesday.

At 10.53am, the rand was at R13.7732 to the dollar from R13.6562, R15.8757 to the euro from R15.8077, and R18.0716 to the pound from R17.9895. The euro was at $1.1525 from $1.1576.