JOHANNESBURG (Reuters) - South Africa’s rand fell to its worst level against the dollar in six years on Monday after the country’s third-quarter current account deficit widened more than the market had expected.
The local currency fell by more than 1 percent after the central bank said the shortfall on the current account balance narrowed to 6 percent of gross domestic product from a revised 6.3 percent previously against economist’s expectations of a 5.8 percent gap.
By 0846 GMT the rand had weakened 1.08 percent to 11.4560 per dollar, its lowest level against the dollar since Oct. 2008.
Chronic deficits on South Africa’s current account and national budget have tended to make the rand more vulnerable than its peers when investors dump emerging market assets during episodes of global risk aversion.
“Despite the revision to GDP, the current account deficit for Q3 prints wider than the consensus had expected,” Standard Chartered economist Razia Khan said.
Fiscal deficits that remain higher than government targets have also exacerbated faltering production in 2014 that was hurt by prolonged labour stoppages in the first half of the year and an increasingly unreliable electricity supply.
“Coming ahead of the Fitch ratings review of South Africa on Friday, this will only add to the list of negatives currently facing South Africa,” Khan added.
The currency was already under pressure after state energy company Eskom [ESCJ.UL] said on Monday power shortages would continue into the week.
Eskom said it would institute further rolling blackouts, following its largest power cuts in nine months over the weekend, as one of its power stations failed to operate at full capacity.
Government bonds also weakened, with the yield on the benchmark issue due in 2026 adding 4 basis points to 7.805 percent.
In a further knock for the rand, data on Monday showed Chinese demand for imports fell by 6.7 percent, the biggest drop since March and a further sign that the world’s second-biggest economy, and a major export destination for South Africa, is cooling.