Rand Slips to Week-Low on Slowing Manufacturing Growth, Zuma State Address
The rand slipped to its lowest in a week against the dollar after manufacturing output in Africa’s biggest economy slowed and before President Jacob Zuma’s state- of-the-nation speech to lawmakers in Cape Town.
South Africa’s currency retreated as much as 1.4 percent to 7.6542 per dollar, the weakest level since Feb. 2. It pared declines after Greek politicians were said to have reached an accord on austerity measures, trading 0.6 percent down at 7.5951 as of 4:04 p.m. in Johannesburg. Against the euro, it slipped 0.7 percent to 10.0866.
Manufacturing (SFPMNSAY) growth slowed in December as Europe’s debt crisis curbed demand for exports to one of the country’s main trading partners, South Africa’s statistics agency reported today. Zuma, 69, will address lawmakers as the government prepares to cut its growth forecast for a second time in four months to below 3 percent and struggles to rein in a budget deficit of 5.5 percent of gross domestic product. He is scheduled to speak in Parliament at 7 p.m.
“The news out of South Africa today was mediocre, to say the least,” Ian Cruickshanks, head of treasury strategic research at Johannesburg-based Nedbank Group Ltd., said by phone. “The manufacturing data was terrible, and then there is nervousness ahead of the state-of-the-nation address.”
Manufacturing accounts for about 15 percent of South Africa’s economy, according to government data. The euro region, which buys about 30 percent of South Africa’s manufactured exports, faces “downside risks” to its economic outlook, European Central Bank President Mario Draghi said today after the central bank left its benchmark interest rate at 1 percent.
South Africa’s factory output rose 2.4 percent from a year earlier, down from a revised 2.8 percent in November. The median estimate in a Bloomberg survey of six economists was for production to increase 2.6 percent.
Zuma is under pressure from his labor union allies and the youth wing of the ruling African National Congress, who want him to nationalize mines and spend more on projects to create jobs.
“He has to confirm that nationalization is not on the agenda, that infrastructure investment is going to be a top priority, that Eskom and Transnet,” the electricity and transport utilities, “are going to be a priority,” Cruickshanks said. “There is a lot riding on this speech.”
The rand pared its decline after an unidentified government official said Greek Prime Minister Lucas Papademos’s office is set to announce a deal on fiscal measures required for a 130 billion-euro financing package.
South Africa’s 6.75 percent bonds due 2021 declined for a fifth day, driving the yield up four basis points, or 0.04 percentage point, to 7.85 percent.
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