Bets are on rate cut as current account gap shrinks
A smaller current account deficit relieves pressure on the rand, which may extend gains after reaching a 19-month high against the dollar on Tuesday
Traders are adding to bets on the first South African rate cut in more than four years after data showed the current account deficit, a key risk for the rand, narrowed and consumer inflation slowed for a second month. Forward-rate agreements starting in December fell seven basis points to 7.03% on Wednesday, 30 basis points lower than the benchmark three-month Johannesburg Interbank Agreed Rate, suggesting that traders expected the central bank’s policy rate to fall in 2017. The rand and government bonds gained, while stocks fell after the S&P 500 index tumbled the most since Donald Trump’s election, on Tuesday. SA relies on foreign investment in stocks and bonds to help fund the current account gap, which swelled to 6.9% of GDP in 2013. A smaller shortfall relieves pressure on the rand, which may extend gains after reaching a 19-month high against the dollar on Tuesday, according to Treasuryone. That may cap the cost of imports, further slowing inflation and enabling the central ba...
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