Rand weakens on spike in political risk
The rand retained its weaker bias against major currencies on Tuesday afternoon, after slightly worse-than-expected current-account data and elevated political risk.
Analysts said trading in the local unit would likely be volatile this week, driven by sentiment due to the absence of significant data releases.
"The current view is a bit more negative than a week ago and could result in some rand weakness," TreasuryOne analysts said.
The local unit lost almost 2% on Monday after Public Protector Busisiwe Mkhwebane said the Reserve Bank must change its mandate from protecting the value of the rand to protecting the socio-economic status of SA’s citizens.
It has also been on a weaker footing since the release last week of a revised Mining Charter, which includes more stringent requirements for black ownership and has prompted warnings of lower investment.
SA’s current-account deficit widened slightly in the first quarter‚ to 2.1% of GDP from 1.7% in the last quarter of 2016, the Bank said in its quarterly bulletin on Tuesday. The current-account deficit amounted to R92bn, with markets forecasting between R79bn and R85bn.
Net foreign inflows have supported the rand as investors seek yield in emerging markets.
In its quarterly bulletin, the Bank said foreign portfolio investment totaled R25.9bn for the first quarter compared to R1.9bn in the fourth quarter of last year, mainly due to foreign interest in domestic debt securities (bonds).
"Terms of trade have steadily improved throughout 2016 and into 2017 which, in turn, has contributed to the rand’s appreciation of 13% in 2016 and 5% in the year to date," Investec economist Kamilla Kaplan said on Tuesday. The deficit is still expected to narrow this year compared to last year, reflecting soft domestic consumption, she said.
At 3.30pm‚ the rand was at R13.0391 to the dollar from R12.9891, R14.5374 to the euro from R14.4869, and at R16.4963 to the pound from R16.5452.
The euro was unchanged at $1.1149.