RTRS: Rand firms, bonds ease after interim S.Africa budget
By Vuyani Ndaba
JOHANNESBURG (Reuters) - South Africa's rand firmed against the dollar on Thursday after Finance Minister Pravin Gordhan promised to keep a tight lid on spending despite having to widen his 2012 budget deficit forecast due to the worst mining strikes since apartheid.
The rand was at 8.74 against the dollar at 1533 GMT from Wednesday's close of 8.7810 in New York.
It strengthened to as much as 8.685 shortly after Gordhan vowed in his Medium Term Budget Policy Statement (MTBPS) to crack down on government wastage and corruption as a counterweight to slightly lower economic growth than his February forecast.
The Treasury projected a 2012/13 budget deficit at 4.8 percent of GDP, in line with a Reuters poll of economists, from 4.6 predicted in February. South Africa's growth forecast was also cut to 2.5 percent from 2.7 percent.
"The rand strengthened a little bit but was in a very tight ranges today," said Ion de Vleeschauwer, a trader at Bidvest Bank in Johannesburg. "There was nothing really earth-shattering in the speech that could influence the currency."
Gordhan also sought to allay fears of a meltdown in Africa's biggest economy, saying it remained on a firmer footing than most of the developed world and dismissing downgrades by Moody's and S&P as "inappropriate".
The 3-year bond yield rose 1.5 basis points to 5.475 percent and that on the longer-dated bond picked up 3.5 basis points to 7.740 percent.
"Yields are marginally higher after the information was digested," said Steve Arnold, a bond trader at Investec. "The million dollar question is what is going to happen with growth down the line." Continued...
The yield curve steepened at the longer end as investors fretted about the possibility of even weaker growth figures than expected - and consequently even widen deficit figures.
"It all comes down to growth assumptions. If the minister's were too high, then revenues will fall short. It highlights a little downside risk with revenue receipts," Arnold added.
Before Gordhan's interim budget, producer inflation figures undershot analyst expectations, coming in at 4.2 percent year-on-year in September compared with 5.1 percent in August.
