Rand edges higher, holds on to post-Budget gains

The rand was slightly firmer early on Thursday, holding on to gains it made in the previous session after Finance Minister Tito Mboweni’s budget speech assured some investors that the country could avoid a full fiscal crisis.

At 0630 GMT, the rand was 0.19% firmer at R14.47 per dollar, a touch off its 13-month high of R14.39 it hit on Wednesday.

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Mboweni announced up to R19.3 billion ($1.33 billion) of spending on coronavirus vaccines and forecast a deficit of 14% of gross domestic product this fiscal year, while repeating promises to cut down on expenditure.

The Treasury also announced steep reduction to issuing debt in the local market after leaning heavily on investors for short-term cash in 2020 to fund the revenue shortfall triggered by Covid-19 and subsequent lockdowns.

But not all investors were enthusiastic about the economic recovery path painted by the budget.

Fitch, one of three major credit ratings firms to rank South Africa in subinvestment, said the country still faced “severe challenges” to implementing fiscal consolidation.

Traders said focus has shifted back to external developments, specifically Federal Reserve Chairman Jerome Powell’s congressional testimony, likely leaving the rand in limbo for most of the session.

Source: moneyweb.co.za