After a report revealed that South African private-sector credit growth eased in February the Rand experienced fluctuations, trading in the region of 9.2502 Rand per US Dollar. The expectation that a separate report may show South Africa’s trade gap narrowing and ongoing concerns in the Eurozone also caused movement in the currency.
At the current exchange rate 1 US Dollar will purchase 9.2600 South African Rand as of 10:22 am GMT
Although economists expected the most recent data to show growth in household/company borrowing eased from 8.6 per cent to 8 per cent, it actually slid to 7.9 per cent.
Meanwhile, a report due for release later today is expected to show that South Africa’s trade shortfall narrowed from a record high 24.5 billion Rand to 12.5 billion Rand. A disappointing result could trigger further declines in the South African currency.
In the final quarter of last year, mining strikes and the global economic slowdown contributed the South Africa’s current account gap reaching 6.5 per cent if GDP – close to a four year high and the cause of additional pressure on the Rand.
As it stands, the South African currency is in line to record a quarterly decline of 8.4 per cent, making it the worst performing currency in the emerging market.
The Rand hasn’t experienced such a significant quarterly decline since it plummeted by 20 per cent in September 2011.
As Johannesburg-based strategist Bruce Donald asserts: ‘On the local front, the focus of market attention will be on the trade balance. The lumpy and erratic nature of the data means there is considerable two-way market risk here.’
On the global front investors will be looking to Europe. With Cypriot banks reopening after being closed for almost two weeks, fears of a run on banks has lead to a withdrawal limit being imposed. The market is likely to experience volatility depending on how the populace of Cyprus reacts to this latest development.
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