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South Africa's rand steadies after overnight losses from budget speech

10/29/2020 | 02:56am EST
South African Rand coins are seen in this photo illustration

JOHANNESBURG (Reuters) - South Africa's rand stepped back from its overnight lows on Thursday, regaining some of the losses following the shock of Wednesday's budget speech that showed still-ballooning debt and a deeper recession.

At 0640 GMT, the rand was 0.46% firmer at 16.3200 per dollar, having slipped to as low as 16.4775 overnight, its worst in one week, over the bad news locally and abroad.

France and Germany went back into lockdown on Wednesday, as a massive second wave of coronavirus cases threatened to overwhelm Europe, rattling already fragile hopes of global economic recovery.

Locally, the long-anticipated medium-term budget speech by Finance Minister Tito Mboweni disappointed, with investors saying it was short on details about the economic recovery plan.

"Finance Minister Mboweni's moment to announce brave and sweeping reforms came and went, and still the country continues towards fiscal collapse, albeit at a lower gear," said economists at ETM Analytics in a note.

Analysts at BNP Paribas said the budget speech was not a "game-changer" for local assets. "On balance, it should be viewed as market neutral," said senior economist Jeffrey Schultz. "An additional diversion of state funds towards SAA was probably the most negative element."

In addition to a freezing the public wage bill for three years, the treasury allocated 10.5 billion rand ($649.66 million) bailout of state-owned beleaguered airline South African Airways.

Bailouts of state firms are among the biggest risk to the country's credit rating. The three major ratings firms are set to review South Africa's debt in coming weeks.

(Reporting by Mfuneko Toyana; Editing by Krishna Chandra Eluri)

© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
EURO / SOUTH AFRICAN RAND (EUR/ZAR) 0.00% 18.43109 Delayed Quote.17.35%
US DOLLAR / SOUTH AFRICAN RAND (USD/ZAR) -0.11% 15.17775 Delayed Quote.9.13%
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