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Rand Gains First Time in Five Days as U.S. Faces Budget Shutdown

The rand strengthened for the first time in five days against the dollar as political wrangling over the U.S. budget threatened a partial government shutdown and South Africa’s fiscal deficit narrowed.

Congress has one day to end a stalemate that risks 800,000 federal workers being sent home if Republicans and Democrats fail to pass a stopgap spending bill. South Africa’s budget shortfall improved to 1.8 billion rand ($179 million) last month from 57.7 billion rand in July, the National Treasury said today. The nation unexpectedly posted its biggest trade gap in seven months in August, while credit growth accelerated more than estimated, separate reports showed.

“There is very little time to go” with the threat of a shutdown weighing on the dollar and local data having very little influence on the rand, Sean McCalgan, head of real-time research at ETM Analytics, said by phone from Johannesburg. A shutdown represents a “massive fiscal risk to the U.S. economy as well as a growth risk,” luring investors to other assets seen as havens, such as the yen, he said.

The rand strengthened 0.6 percent, the most in a week on a closing basis, to 10.0283 per dollar as of 3:22 p.m. in Johannesburg. That pared its decline this quarter to 1.5 percent, the worst of 16 major currencies tracked by Bloomberg after Mexico’s peso, and stretching the run of losses to six quarters. The dollar fell against 12 of the 16 major currencies today. Yields on South African government bonds due December 2026 dropped four basis point, or 0.04 percentage point, to 7.96 percent.

South African exports to the U.S. increased 14 percent to 52.5 billion rand ($5.2 billion) in the year to July, according to figures from the country’s revenue service.

Shortfall Widens

The trade deficit in Africa’s biggest economy widened to 19.1 billion rand in August from 14.2 billion rand in July, the Pretoria-based service said in an e-mailed statement today. The median estimate of 11 economists in a Bloomberg survey was for a 13.9 billion-rand shortfall.

Growth in borrowing by households and companies advanced to 8.2 percent in August from 7.4 percent in the previous month, the Reserve Bank said on its website today. The median estimate in a Bloomberg survey of 13 economists was 7.2 percent.

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