South African rand weakens ahead of key economic data

The South African rand weakened in early trade on Thursday as investors awaited key monthly data releases from the central bank, the revenue service and National Treasury for clues on the health of Africa’s largest economy. At 0549 GMT, the rand traded at 16.8975 against the dollar, about 0.4% down from its previous close. The South African Reserve Bank will release money supply data at 0600 and private sector credit figures for March.

Investec economist Lara Hodes said private-sector credit extension rose 10.5% y/y in February, driven by stronger corporate and consumer borrowing amid a more favourable interest rate environment and improved confidence (before the onset of the war in the Middle East). She expects growth to slow to about 9.6% y/y in March. Later in the day, South Africa’s revenue service agency and National Treasury are expected to publish trade and budget balance data, respectively.

“We expect a narrowing of the surplus in the near term with the war in the Middle East disrupting supply chains, while the surge in the oil price and depreciation of the rand will have weighed heavily on the value of imports,” said Hodes. South Africa’s benchmark 2035 government bond was flat in early deals, with the yield at 8.86%.