JOHANNESBURG (Reuters) – South Africa’s rand weakened against the dollar in line with the euro on Thursday, relinquishing earlier gains which had been triggered by the government’s plan to narrow the budget deficit.
At 1523 GMT the local unit was trading down 0.75 percent at 11.5325 per dollar, compared with Wednesday’s close of 11.4460.
“We had a lovely start to the day – the markets perceived the budget as friendly; there was a general risk-on type of thing and it was going hunky dory until the euro got in the way,” Rand Merchant Bank trader Jim Bryson said.
“We are certainly being driven by outside factors at the moment.”
The euro zone currency fell against the dollar as stronger-than-expected data on U.S. durable goods orders in January signalled resilience in business activity.
The rand had climbed to 11.3625 earlier on Thursday, a day after Finance Minister Nhlanhla Nene downgraded the economic growth outlook, but still delivered a budget analysts said showed the government was serious about reining in spending.
The budget however highlighted the challenge the government faces in narrowing the deficit, curtailing interest expenditure and containing debt, without denting already sub par economic growth, ratings agency Fitch said.
Government bonds closed higher, with the yield on the benchmark instrument maturing in 2026 shedding 5 basis points to 7.555 percent.
