In South Africa Rand, bonds on backfoot after medium term budget

The local bourse was set to open slightly lower at 0700 GMT, as indicated by a 0.27 percent dip in the Top-40 futures index.

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South African bank notes featuring images of former South African President Nelson Mandela (R) are displayed next to the American dollar notes in this photo illustration in Johannesburg August 13 2014. REUTERS/Siphiwe Sibeko play South African bank notes featuring images of former South African President Nelson Mandela (R) are displayed next to the American dollar notes in this photo illustration in Johannesburg August 13 2014. REUTERS/Siphiwe Sibeko
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South Africa's rand hovered near the previous day's week lows against the dollar on Thursday and was likely to stay under pressure after the Finance Minister painted a dim picture of the economic outlook in his medium term budget.

The local bourse was set to open slightly lower at 0700 GMT, as indicated by a 0.27 percent dip in the Top-40 futures index.

South African rand notes in a file photo. REUTERS/Siphiwe Sibeko play South African rand notes in a file photo. REUTERS/Siphiwe Sibeko

 

At 0648 GMT, the rand traded at 13.5135 to the dollar, little changed from Wednesday's closing level at 13.5300.

The local unit had fallen more than 1.6 percent during Wednesday's session, hitting a trough of 13.5400 after Finance Minister Nhlanhla Nene cut the growth forecast and indicated the budget deficit would remain under pressure for the next three years.

READ: Rand softer ahead of medium term budget speech

The Treasury also said public spending would rise over the next three years to 4.7 trillion rand mainly due to above-inflation public sector wage increases, raising the spectre of credit downgrades for Africa's most developed economy.

"In our view (the budget) underwhelmed, leaving unanswered questions about South Africa’s fiscal outlook and ability to achieve fiscal consolidation," Barclays Africa said in a note.

A five rand coin is displayed at the South African Mint in a file photo. play A five rand coin is displayed at the South African Mint in a file photo. (Reuters/ Juda Ngwenya)

 

"The rand could remain on the back foot against its major peers today."

Government bonds extended the previous day's losses, with the yield for debt due in 2026 adding 4.5 basis points to 8.455 percent, a three-week high.

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