Johannesburg - The rand fell to its lowest level in more than six months, leading declines among major currencies, as South Africa’s current-account deficit widened more than anticipated after strikes curbed exports.
The currency of Africa’s second-largest economy dropped 1.2 percent to 10.9419 per dollar by 3:28 pm in Johannesburg, the worst on a closing basis since February 20 and biggest decline among 16 major currencies tracked by Bloomberg.
The gap on the current account increased to 6.2 percent of gross domestic product in the second quarter, the central bank said today, exceeding all but one estimates of 17 economists surveyed by Bloomberg.
The second quarter was “a complete nightmare,” Mohammed Nalla, head of strategic research at Johannesburg-based Nedbank, said by phone.
A five-month strike by platinum miners that crippled output was followed by work stoppages among metalworkers, while higher dividend payments to foreign investors compounded the current-account shortfall.
The economy is forecast to expand at the slowest pace since the 2009 recession as a 9 percent drop in the rand against the dollar over the past 12 months threatens to fan inflation, pushing policy makers to raise interest rates.
Consumers, who account for more than 60 percent of spending in the economy, are also under pressure, with the expansion in household expenditure easing to 1.5 percent in the second quarter from 1.8 percent in the previous three months, the central bank report showed.
Rising prices for government services and gasoline, which is set by the state, is further crimping budgets, Nedbank’s Nalla said.
Stocks Slide
“Disposable incomes have been eroded by higher administered prices that have come through,” he said.
“That’s not likely to be a trend that will abate anytime in the near future.”
Retailers and banks on the Johannesburg Stock Exchange slid.
FirstRand, South Africa’s second-largest bank, led the decline among lenders, falling 3.5 percent after saying in its earnings release that “economic headwinds” in South Africa are increasing and bad loan impairments may increase.
Nedbank, the lender owned by Old Mutual, shed 2 percent.
Truworths International, a clothing retailer, dropped 2 percent, while Shoprite, the continent’s largest grocer, declined 0.6 percent. - Bloomberg News