Rand weakens after Treasury cuts growth forecast

JOHANNESBURG (Reuters) – South Africa's rand weakened against the dollar on Thursday, a day after the finance minister warned that Africa's most advanced economy was not making sufficient progress to reduce poverty and create jobs.

In his maiden mid-term budget speech, minister Nhlanhla Nene downgraded South Africa's growth forecast for the next three years, saying the economy would only grow by 1.4 percent in 2014 compared to the 2.7 percent predicted by the ministry in February.

The rand rallied below the crucial 11.000 against the greenback following the budget speech, closing at 10.9970 in New York, before easing back 0.12 percent to 11.0100 by 0614 GMT on Thursday.

Yields on government bonds dropped to seven-week lows shortly after Nene told parliament that the budget deficit for 2014/15 was now seen at 4.1 percent of GDP, well below a Reuters poll anticipating a 4.4 percent gap.

The yield on the benchmark government issue due in 2026 was flat at 7.895 percent in morning trade, after shedding 12.5 basis points in the previous session.

"While the MTBPS (budget speech) sent the correct message to the market, weaker than anticipated growth could result in higher gross government debt levels," Rand Merchant Bank analyst Mamello Matikinca said in a note.

(Reporting By Mfuneko Toyana; Editing by Ed Stoddard)