Money SA economy
The South African rand weakened sharply in midday trade on Thursday, dragged down by a combination of a worse than expected current account deficit and a softer euro against the US dollar, a local trader said.
South Africa's current account deficit widened ahead of expectations to 4.6% of GDP in the first quarter of 2010 from the 2.9% of the fourth quarter of last year, according to the South African Reserve Bank's (SARB's) quarterly bulletin on Thursday.
The market was expecting a deficit of 3.5% of GDP and the final outcome surpassed even the worst expectation of 4.4% of GDP.
At 11.41am the rand was bid at R7.58 to the dollar, R9.32 to the euro and R11.37 to the pound. The euro was bid at $1.2282 from $1.2316 overnight.
"The rand took a beating against the US dollar on back of the wider than expected current account deficit. Adding to the weakness of the local unit was the euro which came off against the US dollar amid risk aversion. The underlying weakness behind the euro-dollar movement is the series of negative economic data we have seen this week out of the US which weighed on emerging market currencies," a trader said
Meanwhile, RMB said South Africa's current account is worsening again. "After reaching a low of 2.9% in fourth quarter of 2009, the deficit widened sharply to 4.6% of GDP in first quarter of 2010. A further widening can be expected going forward, implying that once again South Africa is building up a current account problem (our expectation is for a deficit over 5% this year, growing to nearly 7% next)," RMB said.
