The rand was flat early on Friday in increasingly cautious trade ahead of the budget speech next week, which is expected to detail the progress of the country’s economic recovery.
At 0645 GMT, the rand was 0.03% weaker at R14.58 per dollar, barely changed from its overnight close, despite a slide in the greenback after disappointing employment data dimmed hopes of a rapid recovery in the world’s top economy.
The rand’s rally in the first two months of 2021 to a one-year high has largely been driven by offshore events, with expansive stimulus policies in the United States and other developed economies, as well as the roll-out of Covid-19 vaccines, driving global risk demand.
That optimism has dimmed in recent sessions with investors looking to book profits and wait for the next catalyst. Locally, the budget speech due to be delivered by Finance Minister Tito Mboweni on February 24 has led to further caution.
“Ahead of South Africa’s Budget Speech, markets are optimistic about the outcome,” said Standard Charted’s chief Africa economist Razia Khan.
Recent data has shown better-than-expected economic activity and revenue collection at the end of 2020, while slowing Covid-19 infections and the roll-out of vaccines have soothed sentiment.
“Markets expect the good news to persist. Expectations of downward revisions to previously outlined fiscal deficits now shape the market consensus,” she said.
Bonds also inched lower, with the yield on the benchmark 2030 government issue up 0.5 basis point to 8.770%.