September 6, 2018 / 4:16 PM / 2 months ago

UPDATE 2-Rand firms after South African current account narrows sharply

(Update prices and analysts quotes)

JOHANNESBURG, Sept 6 (Reuters) - The South African rand firmed on Thursday after data showed the country’s current account deficit was narrowing more than expected and as other emerging market currencies picked up.

At 1545 GMT the rand was 0.78 percent stronger at 15.3150 to the dollar, after hitting a high of 15.2425 earlier in the session.

The current account deficit narrowed to 3.3 percent of GDP in the second quarter, from a revised 4.6 percent of GDP in the first quarter. A Reuters poll had forecast a deficit of 3.4 percent of GDP.

“Emerging markets are seeing a bit of a breather. The rand has been overstretched and now it’s a bit of a correction phase. The positive current account news was kind of expected and has put people’s mind’s at ease,” said Rand Merchant Bank forex trader Jan Sluis-Cremer.

Moody’s on Thursday cut its 2018 economic growth forecast for South Africa to between 0.7 and 1 percent, from 1.6 percent, and will review its credit rating on the country in October.

The yield on South Africa’s benchmark government bond maturing in 2026 rose 1 basis point to 9.2 percent, reflecting weaker bond prices.

On the stock market, banks rebounded after being hit by data on Tuesday that showed South Africa had tipped into recession.

The banking index rose by 2.7 percent.

That helped the blue chip top 40 index rise 0.12 percent to 50,893 while the all-share index edged up just 0.05 percent to 57,131 points.

“On announcement of the recession, banks were punished. With the currency starting to look a little better today, there is a reprieve,” said Independent Securities trader Ryan Woods.

FirstRand, South Africa’s largest lender, closed 3.9 percent higher after it beat estimates with a 12 percent rise in annual profit on Thursday, helped by income and deposit fees.

South Africa’s biggest insurer Sanlam was up 0.17 percent after reporting a 10 percent rise in half-year profit as a stronger showing at its offshore businesses offset a weak performance at home.

Reporting by Nomvelo Chalumbira and Patricia Aruo; Editing by Susan Fenton

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