South Africa’s rand strengthens ahead of mid-term budget

JOHANNESBURG (Reuters) -The South African rand rose on Monday at the start of a data-heavy week that includes the government’s midterm budget statement.

At 1505 GMT, the rand traded at 18.8000 against the dollar, more than 0.3% stronger than its previous close.

Meanwhile, the dollar last traded down 0.4% against a basket of global currencies.

South Africa’s finance minister Enoch Godongwana will on Wednesday table in parliament the medium-term budget policy statement (MTBPS), which updates economic forecasts, adjusts the budget and makes emergency changes to spending.

The rand’s appreciation in recent days is surprising given that Godongwana will likely highlight the deterioration of South Africa’s fiscal position, analysts at ETM said.

The currency could be drawing strength from more hawkish talk from the South African Reserve Bank, which has left the prospect of another rate hike on the table, they said.

“The broader picture remains worrisome, with all eyes turning to the MTBPS to determine if the government has the appetite to implement urgently needed structural reforms,” ETM Analytics said in a research note.

Central bank data on Monday showed that South Africa’s credit growth had risen to 4.60% in September from 4.39% in August, and that M3 money supply growth was at 7.67% in September, down from 8.53% the previous month.

National Treasury figures showed the country recorded a budget deficit of 14.59 billion rand ($774.84 million) in September, compared to a deficit of 3.29 billion rand in the same month a year earlier.

Shares on the Johannesburg Stock Exchange rose, with the blue-chip Top-40 index closing over 0.7% higher.

South Africa’s benchmark 2030 government bond fell, the yield up 5.5 basis points at 10.715%.

($1 = 18.8298 rand)

(Reporting by Nellie Peyton with additional reporting by Bhargav Acharya; Editing by Varun H K and Bill Berkrot)