Rand hits seven-month high ahead of Mboweni’s medium-term budget

Currency firms to best level against the US dollar since Covid-19 lockdown.
Image: Waldo Swiegers/Bloomberg

The rand strengthened further to around R16.10 in intraday trade on Tuesday (around 14:00) against the US dollar, a day before Finance Minister Tito Mboweni is set to deliver the country’s Medium-Term Budget Policy Statement (MTBPS).

It’s the rand’s best level versus the greenback in more than seven months. The currency last traded in this range on March 9-10, which was couple of weeks before South Africa went into the initial ‘hard’ Covid-19 lockdown on March 27.

Read: Mboweni: Close the hippo’s mouth or face Argentina-like debt crisis

By the first week of April the rand plunged to over R19 to the dollar and some market commentators predicted that it could hit the psychological R20-mark due to the Covid-19 economic fallout and related market volatility.

However, the rand has strengthened since then and on Tuesday firmed further by around 0.75% in intraday trade (R16.10). It has gain more than 5% against the dollar since the start of October.

The attention is now focused on Mboweni’s MTBPS on Wednesday. The ‘mini budget’ could present downside risk to the rand, especially if South Africa’s fiscal deficit widens more than the National Treasury’s projections during the supplementary or emergency budget in June, which came in response to the Covid-19 economic fallout.

Read: SA’s budget deficit hits record 15.7% of GDP

In June, Mboweni revealed that the country’s consolidated budget deficit is forecast to more than double to 15.7% of GDP in the 2020/21 financial year. He noted that the “narrower measure, known as the main budget deficit” is projected to be 14.6% of GDP.

At the time, he also pointed out that the country’s gross tax revenue collection was significantly down due to the impact of Covid-19 and restrictions both locally and globally. He noted that government was expecting to miss its tax target by more than R300 billion for this year.

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Zero to do with MTBS – do these “journalists” even watch the markets.

Such selective journalism. The strengthening of ZAR is not related to any internal affairs. Might as well link the market weakness to US$ elections??

hope americans vote the dic@@head out of his presidency so that the rand can strengthen and we can all emigrate

LOL on that comment…

Double LOL actually….1) for it’s blatant TDS nature and 2) for the prospect of you skyscreaming in a week’s time, both at the election outcome and your hopes for the South African Runt…

Keep playing in the shallow end of the gene pool…

The article doesn’t say why ZAR has strengthened, even as “risk off” is on cards again and stock markets are wobbling. Clearly the Reserve Bank is in the market, spun king it’s money away, trying to protect the Rand as Mboweni prepares for his ordeal with the MTBPS tomorrow. Expect weakening to resume once it’s all over….

Maybe you should look at our foreign reserve figures – that will clearly indicate that the SARB is not in the market…

I think there are foereign (IMF etc)flows into the market that is pushing Dol/Rand lower!

Rand strength since April purely based on a weaker US dollar. Nothing to do with better SA prospects. The rand is one of the most volatile currencies. However, the elastic can only stretch so much, so a weaker rand, given all the local risks, is on the cards. An opportunity has been created to increase offshore exposure. Thank you, dollar!

End of comments.

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