Rand Tumbles on Negative Fundamentals & Bad News from Europe

The South African rand dropped yesterday and remained weak today on the signs of the nation’s economic weakness. The currency also felt the negative impact of the news from Europe, but the European problems allowed the rand to outperform the euro.
South Africa’s current account deficit widened to 3.8 percent of the gross domestic product in the third quarter, reaching the highest level in 18 months. The increase of the current account shortfall was caused by the slowing manufacturing and the decreasing mining exports. The factory production growth slumped to 1 percent in October from 8.1 percent in September, compared to the market expectations of a 5.7 percent increase.
The negative sentiment, caused by the unwillingness of the European Central Bank to take more responsibility in dealing with the European crisis, added to the downward pressure on the rand. Today’s meeting of the European leaders should be an important junction and may lift the South African currency or hammer it further down, depending on the message the politician will send to markets.
USD/ZAR traded at about 8.2150 today as of 4:00 GMT after it jumped from 7.9850 to 8.2440 yesterday. EUR/ZAR fell from 11.0316 to 10.9991 today.

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