South African rand flat ahead of mid-year budget review

The South African rand was little changed in early trade on Wednesday, Oct 21, as investors avoided large positions ahead of the mid-year budget review. At 0542 GMT, the rand traded at 16.4075 against the dollar, a whisker away from Tuesday's close.

Finance Minister Enoch Godongwana is due to deliver the Medium-Term Budget Policy Statement at around 1200 GMT. Economists expect an improved fiscal outlook, with a revenue windfall bolstering a push to regain an investment-grade credit rating.

Spending pressure ahead of elections

Record-high fuel prices, weak economic growth and pressure to spend ahead of November 4 local government elections could limit how much of the windfall the Treasury saves. The budget review is expected to provide clues on South Africa's fiscal outlook and credit-rating prospects.

Inflation and retail sales in focus

Statistics South Africa is set to release consumer inflation and retail sales data on Wednesday, giving a snapshot of price pressures and consumer demand in Africa's largest economy as the Middle East conflict keeps fuel costs elevated. Economists polled by Reuters expect headline inflation to accelerate to 4.7% in September from 4.4% in August. Annual retail sales growth is forecast to edge up to 3.5% in August from 3.4% in July.

Investec forecasts inflation at 4.6%, while Nedbank expects 4.8%, citing higher transport costs driven by rising fuel prices and rand weakness.

Rand and bond market moves

The rand fell more than 2% against the dollar in September. South Africa's benchmark 2035 government bond was flat in early deals, with the yield at 8.735%.