South African recession worsens as stocks slide

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South African President, zuma-Jacob

South Africa’s rand slipped to its weakest in three weeks on Wednesday as traders opted to bank small profits from the currency’s dip below a crucial technical mark with creeping concerns about credit downgrades souring sentiment.

By 1538 GMT the rand had weakened 1.27 per cent to 13.1700 per dollar, touch improved after sliding as low as 13.1775, its worst level since August 25, according to Reuters.

Early trade saw the rand push below the 13.00 psychological mark as steady gold demand on the back of a bout of global risk aversion, attracting some long buyers as the unit approached 12.95 short-term resistance point.

The interest was brief, with a warning by Moody’s that political pressure building around the central bank posed a key credit risk further swaying sentiment against the rand.

“The rand’s been one of the best-performing EM currencies over the last few weeks so some profit-taking was to be expected,” said chief dealer at Treasury One, Wichard Cilliers.

“With the tax shortfall and the noise being made by Moody’s focus is on whether Minister Gigaba will be able to balance the books. That’s why you’ve seen negativity against the rand as well,” Cilliers said.

Finance Minister, Malusi Gigaba, told lawmakers on Wednesday the revenue service collected $1bn less tax than forecast in the first quarter, again raising the spectre of a widening budget deficit and higher, more expensive debt.

Weaker than forecast retail sales figures and business confidence remaining in negative territory underlined the dismal outlook.

On the bourse, Woolworths slumped 3.9 per cent to 58.80 rand as the retailer started trading without rights to its latest dividend payouts.

Overall, investors took their cue from major overseas markets, which paused from a recent rally on easing concerns about North Korea.

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