Fitch’s debt gloom knocks rand

The rand extended losses on Friday after Fitch Ratings said SA was unlikely to achieve its plans to stabilise debt levels within four years.

“This reflects persistent challenges in reducing expenditure, boosting growth and insulating public finances from struggling state-owned enterprises, as well as reflecting the impact of the coronavirus pandemic, which this will drive”a year, Fitch sharp said rise in in debt a statement to GDP on Friday.

The Fitch report comes after finance minister Tito Mboweni said in the supplementary budget on Wednesday that the government plans to achieve a primary surplus by 2024.

At 5.30pm, the rand had weakened the most in two days, down 1.03% to R17.3210/$, 1.01% to R19.4191/€ and 0.35% to R21.3529/£. The euro was flat at $1.1211.

The yield on the R2030 government bond had risen 1.5 basis points to 9.185%. Bond yields move inversely to prices.

“The rand remains trapped in an unfair battle against domestic and external risks with the longer-term outlook pointing to further losses,” said FXTM senior research analyst Lukman Otunuga.

The JSE dropped for a third successive day on Friday while global equities were mixed as concern about the rapid rise in Covid-19 cases in the US offset positive sentiment over the reopening of economies. The all share fell 0.49% to 53,648.05 points and the top 40 0.51%. Banks dropped 3.44% and financials 1.85%.

The surge in the number of Covid19 cases remained the focal point for global markets last week amid fears that a surge in virus infection rates could delay economic recovery in the world’s largest economy. The number of new cases forced the state of Texas to halt its reopening last week.

“As testing expands [in the US], many investors will focus on increasing hospitalisation rates across the south and west coast,” said Oanda market analyst Edward Moya.

Shortly after the JSE closed, the Dow was down 2.27% to 25,161.27 points. In Europe, the FTSE 100 was up 0.39%, with France’s CAC 40 flat and Germany’s DAX 30 off 0.56%.

Earlier, Hong Kong’s Hang Seng fell 0.93% while Japan’s Nikkei 225 was up 1.13%. The Shanghai exchange was closed for the Dragon Boat Festival.

Gold was little changed at $1,763.28/oz, while platinum was down 0.96% to $796.30. Brent crude lost 1.93% to $40.62 a barrel.