South Africa's rand firms in tentative trade ahead of budget

(Adds latest prices, analyst comments)

JOHANNESBURG, Oct 26 (Reuters) - South Africa's rand strengthened slightly on Monday in tentative trade ahead of a budget speech in which the finance minister is expected to detail the impact of COVID-19 on an economy that was in recession and heavily in debt before the pandemic struck.

At 1600 GMT the rand was 0.08% firmer at 16.1800 per dollar compared to an opening level of 16.2275. The unit spent most of the session hovering above 16.3000, but strengthened after New York trading commenced.

The early weakness was caused by lingering investor concerns about surging coronavirus cases in Europe and the United States and a lack of progress toward a U.S. stimulus package, but the currency's high yield kept bulls in play, especially with the key 16.00 technical level on the horizon.

Economists polled by Reuters last week found the fiscal deficit was set to widen more than projected in June's emergency COVID-19 budget, while falling tax revenues following job losses and lower household expenditure would mean a slower return to growth.

"Consternation – a most fitting description of market positioning ahead of the mini-budget on Wednesday and highly-contested U.S. elections on 3 November," said market analyst at RMB, Nema Ramkhelawan-Bhana.

"Despite the whirlwind of risk, EM assets are trailblazing ... A situation which could be tested depending on the outcome of the MTBPS (Medium Term Budget Policy Statement."

Stocks fell as surging coronavirus cases darkened the global economic outlook.

The benchmark All-Share index closed 0.81% lower at 54,891 points and the Top-40 index fell 0.80% to 50,287 points.

Among the biggest decliners, retailer Steinhoff holdings shares fell 3.49% to 83 cents and pharmacy group DisChem weakened 4.32% to 18.62 rand.

Government bonds strengthened slightly, with the yield on the instrument due in 2030 down 0.5 basis points at 9.280%. (Reporting by Mfuneko Toyana and Tumelo Modiba; editing by Barbara Lewis)

2020-10-26 18:53:57

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