The rand weakened for a third day and bond yields fell before data that may show South Africa’s trade deficit this year is widening, adding to pressure on the current account and the currency.
The nation posted a 15th consecutive monthly trade deficit in June, a report may show at 2 p.m., bringing the cumulative shortfall this year to 78.4 billion rand ($8 billion), compared with 51 billion rand in the year-earlier period. Reports yesterday showed unemployment rose in the second quarter, while the budget deficit for the year outstripped the shortfall for the comparable period in 2012.
“South Africa’s elevated twin deficits are among the highest when compared to other emerging markets, remaining a fundamental negative factor for the rand exchange rate,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said in e-mailed comments. The rand will probably trade in a range between 9.75 per dollar and 9.95 per dollar today, he said.
The currency depreciated 0.5 percent to 9.8520 per dollar as of 10:39 a.m. in Johannesburg. Yields on benchmark 10.5 percent bonds due December 2026 dropped two basis points, or 0.02 percentage points, to 8.15 percent.
The jobless rate rose to 25.6 percent in the second quarter from 25.2 percent in the previous three months, Statistics South Africa said yesterday. The budget deficit in the first half of the year was 74 billion rand, compared with 57.9 billion rand in the same period of 2012, according to data compiled by Bloomberg.
Investors are awaiting guidance from the Federal Reserve, which announces its interest-rate decision today after a two-day policy meeting. The Federal Open Market Committee has said it may reduce asset purchases this year if the economy improves in line with its forecasts.
“Any slight change in wording will be picked apart for signs of how the Fed’s views on the economy are changing and when and how they are likely to start tapering,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. The rand will “be sensitive to the smallest change in tone towards tapering,” he said.
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