South Africa's rand weakened against the dollar on Friday, pressured by a bigger-than-expected domestic trade gap and a low appetite for risky assets as investors worry about Ukraine-Russia tensions. The revenue service issued trade figures which showed South Africa's trade account in a nearly 7 billion rand shortfall in July as imports outpaced the pace of exports even as the rand has remained weak.
"There is still no evidence in the trade figures that rand weakness has assisted in boosting export demand overall. Rand weakness as a stimulant for economic growth is misleading advice," said Investec economist Annabel Bishop. South African manufacturers have previously complained about a strong rand exchange rate but analysts say export numbers are not reacting satisfactorily to the depreciated currency. Instead, the weak rand has fanned inflation and resulted in higher borrowing costs.
At 1610 GMT, the rand traded at 10.6525 to the dollar, down 0.3 percent on its previous close in New York on Thursday. The unit was coming back from a session low of 10.6665. The rand is likely to find support around the 10.68 area, its previous low. Market expectations that inflationary pressures are going to keep the central bank hiking rates this year are expected to keep the rand cushioned. Government bonds traded in ranges in the session and ended the session at 7.985 percent on the benchmark 2026 issue and at 6.61 percent on the bond due next year. Next week investors will contend with vehicle sales data on Monday, a number that is expected to add to a view that South African consumers are under pressure, battling high interest rates and job insecurity.