Although many investors are erring on the side of caution ahead of the Federal Reserve’s greatly anticipated policy statement, which is consequently keeping markets fairly static, the Rand climbed modestly against the US Dollar this morning following the publication of two South African economic reports.
At the current exchange rate 1 US Dollar will purchase 9.9391 South African Rand as of 10:30 GMT
According to the South African Reserve Bank’s quarterly bulletin, the nation’s current account deficit narrowed to 5.8 per cent of GDP in the first quarter of the year, defying economists’ expectations for it to expand to 6.9 per cent from 6.5 per cent in the fourth quarter of last year.
The report cited the boosted revenue received by exporters as a result of a weaker Rand as one of the main contributing factors to the current account deficit unexpectedly shrinking.
In a statement published with the figures the central bank noted: ‘The export earnings of South African producers continued to benefit from the lower exchange value of the rand, which extended into the first quarter. South Africa’s terms of trade improved somewhat in the first quarter of 2013 as export commodity prices held up well relative to the prices of imported goods and services.’
Meanwhile, a separate report showed that the South African inflation rate came in at -0.3 per cent in May, month-on-month, rather than the -0.4 per cent expected.
The Rand weakened against the US Dollar
The South African Rand weakened to 10.0240 against the US Dollar before rebounding slightly.
Year-on-year the inflation rate stood at 5.6 per cent, down from the 5.9 per cent recorded in April but higher than the 5.4 per cent forecast by economists.
This is the first time the inflation rate has fallen for five months.
According to Absa Capital, the drop in petrol prices last month ‘will have directly shaved 0.3 percentage points off the CPI inflation print. May is a month in which many goods and services are not sampled, so there is less capacity for an inflation surprise.’
Last month Gill Marcus, Governor of the Reserve Bank, stated that high inflation and low economic growth are reducing the central banks scope for policy adjustment. This indication that inflation may fall within target sooner than expected could give the central bank a little more room to manoeuvre.
The Rand is likely to experience further movement later today after Fed Chairman Ben Bernanke issues his policy statement at 19:30 GMT.
Current South African (ZAR) Exchange Rates
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The US Dollar/South African Rand Exchange Rate is currently in the region of: 9.9391 <
The Pound Sterling/South African Rand Exchange Rate is currently in the region of: 15.4898 <
The Euro/South African Rand Exchange Rate is currently in the region of: 13.3939 >
The Australian Dollar/South African Rand Exchange Rate is currently in the region of: 9.4806 >
The New Zealand Dollar/South African Rand Exchange Rate is currently in the region of 7.9724 >
The Canadian Dollar/South African Rand Exchange Rate is currently trading in the region of 9.8298 >
(Correct as of 10:30 GMT)
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