The rand weakened the most in five weeks against the dollar, falling more than any other currency, after South Africa posted a record trade shortfall in January, threatening to widen a growing current-account deficit.
The currency plunged as much as 2.2 percent, the most since Jan. 23, to 9.0066 per dollar, breaching through 9 per dollar for the first time since Jan. 31. It traded at 9.0065 by 7:52 p.m. in Johannesburg, the worst-performing among currencies monitored worldwide by Bloomberg. The currency declined 0.5 percent this month. Yields on 10.5 percent bonds due December 2026 rose 1 basis point, or 0.01 percentage point, to 7.30 percent.
The trade gap reached 24.5 billion rand ($2.7 billion) last month compared with 2.7 billion rand in December, the Pretoria-based South African Revenue Service said today, more than the 9.7 billion rand median estimate of economists in a Bloomberg survey. Pressure on the current account, the broadest measure of trade in goods and services, is contributing to the rand’s slump to near a four-year low.
The deficit was “absolutely massive, and you’re seeing the blow-out in the rand,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said by phone. “It’s going to put increasing pressure on the rand.”
The rand has slumped 5.9 percent against the dollar this year, the worst performer among emerging-market peers tracked by Bloomberg.
South Africa’s deficit in 2012 was more than six times larger than a year before at 117.7 billion rand as slower global growth and mining strikes curbed exports in Africa’s largest economy.
Finance Minister Pravin Gordhan yesterday delayed plans to narrow the budget deficit and cut his forecasts for economic growth for the next three years. He said in an interview the economy can “live with” the rand’s current level.
“The deterioration in the budget balance is significantly worse than we had anticipated,” Carmen Nel, a Cape Town-based analyst at Rand Merchant Bank, said in e-mailed comments. “The finance minister indicated that the government is comfortable with the rand at current levels.”
The deficit target was raised to 5.2 percent of gross domestic product in the year through March from 4.8 percent estimated in October. The government will cut spending to help bring the shortfall down to 4.6 percent next year, compared with an earlier projection of 4.5 percent, and 3.9 percent in fiscal 2015. As recently as 2012, Gordhan was targeting a 3 percent gap in two years’ time.
Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have downgraded the nation’s debt since September, concerned by a slowing economy and rising spending pressures. Moody’s and S&P have a negative outlook on the rating, indicating they may lower it further.
“In recent times, we have found a balance, where you don’t hear public noise about the currency issues and people begin to understand the negative effects on fuel prices,” Gordhan said in an interview in Cape Town after giving his budget speech yesterday. “We can live with it. The key is still the volatility question.”
The rand’s three-month implied volatility against the dollar climbed to 12.85 percent, compared with 12.15 percent yesterday, the highest out of 16 major currencies monitored by Bloomberg.