Rand softer as greenback bounces back

THE RAND weakened yesterday, bowing to a firming dollar and growing concerns over possible credit downgrades of the country’s local-currency bonds to “sub investment” at the end of the week.

Stocks rose, led by retailer Mr Price, which reported a jump in interim profits.

At 4.45pm, the rand had weakened 0.45 percent to R14.0350 to the dollar compared to last Friday’s close at R13.9725 in New York, with traders opting to unwind long positions on the local currency and to buy the greenback while it re- mained cheap.

Risks are focused on Friday’s expected ratings announcements by S&P Global and Moody’s.

Both currently have South Africa’s local bond rating a notch above “junk”. Downgrades are likely to trigger outflows of up to R180 billion, the central bank says.

“If by some miracle the agencies decide not to downgrade us, the level of euphoria will certainly be felt and this could see the rand retrace all the way to its mediumterm support level at (R)13.10/15 over the next few weeks,” said Standard Bank chief trader, Warrick Butler, in a note.

Bonds were weaker, with the government issue due in 2026 adding 8.5 basis points to 9.425 percent, as a combination of ratings fears and bets of a hawkish policy stance by the Reserve Bank when its decides on rates on Thursday.

On the bourse, the benchmark JSE Top40 index climbed 0.78 percent to 54 327.42 points, while the all share index nudged up 0.62 percent to 60 500.61 points.

Retailer Mr Price advanced 3.68 percent to R201.99 after reported a 24 percent rise in halfyear profit.

The biggest gainer on the bourse was heavyweight Naspers, which holds a 33 percent stake in Hong Kong-listed Tencent. It gained 3.9 percent to R3 995.01, buoyed by gains for the Chinese gaming giant.

Further gains were curbed by private healthcare operator Netcare, which fell 2.78 percent to R22.36 after it said it would restructure its operations in Britain following a drop in annual profit.

Meanwhile, global equities rose yesterday as confidence over economic growth around the world helped investors brush off concerns about the collapse of government talks in Germany, which sent the euro lower.