BLBG: Rand Declines Before Report That May Show Trade Deficit Widened
By Garth Theunissen
May 31 (Bloomberg) -- South Africa’s rand weakened before a report that is expected to show the nation posted a trade deficit last month, raising the country’s reliance on foreign capital inflows to finance the shortfall.
The currency depreciated as much as 0.3 percent to 7.6516 per dollar before trading less than 0.1 percent weaker at 7.6369 by 10:52 a.m. in Johannesburg, from a previous close of 7.6325.
The deficit probably widened to 2.2 billion rand ($288.2 million) in April, compared with a surplus of 500 million rand the previous month, according to the median estimate of 11 economists polled by Bloomberg. The South African Revenue Service is scheduled to release the data at 2 p.m. local time.
“We’re probably going to see a deficit because retailers’ propensity to import has been quite high lately as they’ve been boosting stock to prepare for the soccer world cup,” Colen Garrow, chief economist at Brait SA, said by phone from Johannesburg. “That may just give a negative signal to the rand.”
South Africa hosts the 2010 Fifa World Cup from June 11 to July 11, the first African nation to stage the tournament.
A larger trade deficit would cause a widening of the shortfall on South Africa’s current account, the broadest measure of trade in goods and services. The deficit is expected to reach 4.9 percent of gross domestic product this year and 5.3 percent in 2011, the National Treasury said on Feb. 17.
South Africa relies on foreign purchases of its stocks and bonds to fund the shortfall and prevent the rand from weakening. Foreign investors have purchased a net 43.6 billion rand of South African assets this year, according to data from the JSE Ltd., which runs the nation’s stock and bond exchanges.
Government bonds fell, with South Africa’s 13.5 percent security due September 2015 dropping 18 cents to 123.14 rand. The yield on the bond rose 4 basis points to 8.03 percent.
Forward-rate agreements showed the cost of three-month contracts for cash in three months was unchanged at 6.5 percent from the previous close. The rate on the contract has risen 14 basis points since reaching a 6 1/2-year low of 6.36 percent on April 21.
