The rand continues to gain ground
THE SOUTH African rand yesterday continued its rally against the US dollar as the local currency continued to take the shine from last week’s unchanged ratings from Fitch and S&P’s Global Ratings, as the greenback sold off after Friday’s disappointing US jobs data.
The local currency strengthened to a high of R12.69 against the dollar from the previous session close of R12.78, while it opened trade at R14.29 against the euro from R14.29 in the previous session and was flat against the British pound at R16.35 from Friday’s close of R16.39.
This marked a sharp retracement from the R13.20 seen last week on Wednesday.
John Cairns, an analyst at Rand Merchant Bank, said that we can expect the rand to consolidate in the upcoming trading sessions, but expected volatility towards the end of the week.
“The ratings updates are not a game changer, though they have brought some relief. The rand was favoured by the week dollar and new highs on Wall Street,” Cairns said.
More potential weakness for the dollar was expected on Thursday when the former head of the FBI James Comey gives testimony to the Senate about allegations that the Russian government influenced the election of Donald Trump as president of the US last year.
Investec economist Annabel Bishop said while the rand strengthened after Fitch and S&P’s left the country’s ratings unchanged, the negative outlook by S&P’s signalled further downgrades for South Africa’s sovereign debt.
“Fitch’s outlook remains stable, meaning no further ratings action is being considered. S&P’s maintained its negative outlook, signalling the next move will likely be a downgrade,” Bishop said.