JOHANNESBURG: South Africa’s rand gained on Tuesday against a weaker dollar as investors awaited a delayed national budget and worried over a possible recession in the world’s biggest economy.
At 1422 GMT, the rand traded at 18.25 against the U.S. dollar, about 0.6% stronger than Monday’s close.
Domestic-focused investors will look to the local budget presentation on Wednesday after it was postponed last month over disagreements in the coalition government over increasing value added tax by two percentage points.
“One hopes that a compromise budget will be announced and passed, or South Africa’s risk profile will take an even larger beating,” ETM Analytics said in a research note.
“Investors will have no choice but to position for a higher-risk environment ahead that will undermine the rand’s performance,” the note added.
The greenback fell to its lowest level since October as markets roiled over U.S. recession fears. It last traded about 0.3% weaker against a basket of peers.
South African rand softens, focus on local budget this week
Traders will also look to U.S. inflation data on Wednesday for hints into the Federal Reserve’s policy path amid simmering trade tensions and slowdown fears in the U.S. economy.
“All indications are that the U.S. is about to enter a recessionary environment and the U.S. exceptionalism argument that has supported the dollar for so long is gradually evaporating,” ETM Analytics said.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index last traded flat.
South Africa’s benchmark 2030 government bond was stronger, with the yield down 1.5 basis points to 9.035%.
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