SA rand weakens

JOHANNESBURG. South Africa’s 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 1445 GMT the rand had weakened 0,45 percent to 14,0350 per dollar compared to last Friday’s close at 13,9725 in New York, with traders opting to unwind long positions on the local currency and to buy dollars while they remained 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 ( $ 12,83 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 medium-term support level at 13.10/15 over the next few weeks,” said Standard Bank chief trader Warrick Butler in a note.

Bonds were weaker, with the benchmark 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. Reuters.