Rand stronger on S&P's unchanged credit rating

File: At 3.40pm on Monday, the rand was at R12.7641 against the dollar; at R14.3639 against the euro; and at R16.5011 against the pound.

JOHANNESBURG - The rand was firmer in afternoon trade on Monday as the market took courage from S&P Global’s unchanged rating of SA’s debt on Friday.

Although S&P kept SA’s junk status unchanged‚ and the outlook at negative‚ the market rated S&P’s unchanged stance as positive ahead of Moody’s announcement later in the month.

Moody’s is expected to downgrade SA’s credit rating by one notch‚ with a negative outlook. Its review is expected on Friday‚ 9 June.

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The rand was also supported by firmer commodity prices and a weaker dollar. The dollar remained under pressure after Friday’s disappointing US nonfarm payroll data.

“The momentum does seem to be in our favour at the moment and we could see investor buying into riskier assets such as the rand‚” said TreasuryOne analyst Gerard van der Westhuizen.

The rand firmed to R12.68/$ in intraday trade but retreated in later trading as the market remained cautious ahead of Tuesday’s first quarter GDP number.

At 3.40pm the rand was at R12.7641 against the dollar from R12.8025. It was at R14.3639 against the euro from R14.4352 and at R16.5011 against the pound from R16.4679.

The euro was at $1.1254 from $1.1275.

There was also a realisation in the market that further downgrades could weaken the rand.

Should SA lose all its local currency investment grade credit ratings from the three key rating agencies‚ an estimated R80bn to R130bn could flow out of the country‚ said Investec chief economist Annabel Bishop.

“The local currency would then depreciate markedly‚” she said.

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