Rand weakens after growth forecast cut
The rand weakened against the dollar after the finance minister slashed 2015 growth expectations to 1.5 percent from a previous forecast of 2 percent.
|||Johannesburg - South Africa's rand weakened against the dollar as government bonds pared gains on Wednesday after the finance minister slashed 2015 growth expectations to 1.5 percent from a previous forecast of 2 percent.
Stocks rose led by platinum producer Lonmin as it unveiled a plan to inject cash into its troubled business through a rights issue.
The rand recovered some losses in volatile trade after touching a session low of 13.54 to the dollar. By 1453 GMT the local currency was at 13.4820 versus the greenback, down 1.33 percent from Tuesday's close.
Delivering his medium term budget speech, Nene said growth is considerably lower in South Africa's economy than the country projected in February as the global commodities slump has added to the problems for Africa's most advanced economy.
Nene also said the government would have to borrow $4.5 billion from global markets over the medium term with debt set to rise to nearly 2.4 trillion rand by 2018/19 due to the weaker rand and higher inflation.
The rand has lost over 13 percent in value against the dollar in 2015 as combination of weak domestic factors and slowing growth globally, particularly in China, have seen the unit tumble to all-time lows.
“It is very clear that there is now very little room for manoeuvre and that any increments to future spending plans will have to be very carefully considered,” said Dennis Dykes an economist at Nedbank.
Government bonds were weak across the curve following a sharp sell off, with the yield for debt maturing in 2026 adding 15.5 basis points to 8.425 percent.
On the stock market, the benchmark Top-40 index rose 0.39 percent to 47,594 points while the All-share index climbed 0.22 percent to 52,997 points.
Johannesburg-listed shares Lonmin were the biggest gainer on the All-Share index, rising as much as 22 percent after the company said it planned to raise $400 million through a rights issue and restructure its debt in the face of depressed prices.
Shares ended 4.8 percent up at 6.10 rand.
“A renegotiation of debt and raising of cash could make them a more attractive target for buyers,” Investec Securities said in a note.
Reuters