ZAR Falls After Wider than Expected Trade Deficit in South Africa

The rand slid to an eight-month low against the dollar after South Africa’s monthly trade deficit widened more than economists predicted.

The nation’s trade shortfall widened to 16.3 billion rand ($1.4 billion) in August, the highest in seven months, from a revised 6.8 billion rand in July, the South African revenue service in Pretoria said today. The median estimate of 14 economists in a Bloomberg survey was a deficit of 8.7 billion rand. A slump in exports is adding to pressure on the current-account deficit, undermining the rand at a time when investors’ expectations of Federal Reserve rate increases are weighing on emerging-market currencies.

“It’s a bit of a train smash here for the rand and it’s probably not going to stop soon,” Ion de Vleeschauwer, chief dealer at Bidvest Bank Ltd., said by phone from Johannesburg. “The dollar doesn’t show signs of any weakening at all. Combined with very, very bad local numbers, there’s only really one way this currency’s going to go and that’s weaker, and by lots.”

The rand depreciated 0.3 percent to 11.3157 per dollar by 3:59 p.m. in Johannesburg, the weakest level since Jan. 31. It touched a five-year low of 11.3909 on Jan. 30.

Exports dropped by 9.6 percent to 77.2 billion rand in August as shipments of mineral products, which include coal and iron ore, fell by 5.1 billion rand, or 24 percent, and precious metals and stones decreased by 15 percent. Imports rose by 1.4 percent to 93.5 billion rand.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza