Rand Slumps to 8-Month Low on Wider-Than-Forecast Trade DeficitRobert Brand and Neo Khanyile
The rand slid to an eight-month low against the dollar after South Africa’s monthly trade deficit widened more than economists predicted.
The nation’s trade shortfall widened to 16.3 billion rand ($1.4 billion) in August, the highest in seven months, from a revised 6.8 billion rand in July, the South African revenue service in Pretoria said today. The median estimate of 14 economists in a Bloomberg survey was a deficit of 8.7 billion rand. A slump in exports is adding to pressure on the current-account deficit, undermining the rand at a time when investors’ expectations of Federal Reserve rate increases are weighing on emerging-market currencies.
“It’s a bit of a train smash here for the rand and it’s probably not going to stop soon,” Ion de Vleeschauwer, chief dealer at Bidvest Bank Ltd., said by phone from Johannesburg. “The dollar doesn’t show signs of any weakening at all. Combined with very, very bad local numbers, there’s only really one way this currency’s going to go and that’s weaker, and by lots.”
The rand depreciated 0.3 percent to 11.3157 per dollar by 3:59 p.m. in Johannesburg, the weakest level since Jan. 31. It touched a five-year low of 11.3909 on Jan. 30.
Exports dropped by 9.6 percent to 77.2 billion rand in August as shipments of mineral products, which include coal and iron ore, fell by 5.1 billion rand, or 24 percent, and precious metals and stones decreased by 15 percent. Imports rose by 1.4 percent to 93.5 billion rand.
“South Africa’s trade deficit is likely to remain structurally high over the medium term which suggests that a turnaround in the currency’s fortunes seems unlikely any time soon,” Jeffrey Schultz, an economist at BNP Paribas Cadiz Securities in Johannesburg, said in an e-mail.