RAND LOSES MORE GROUND

THE RAND extended losses yesterday to touch a fresh one-week low after rating agency Moody’s cut its economic growth forecast for South Africa, raising fears that the country may lose its last investment-grade rating.

At 5pm, the rand bid at R15.0339 to the dollar, its weakest level since February 10.

Moody’s on Monday cut its 2020 gross domestic product growth for SA to 0.7 percent, partly due to the impact of rolling power outages on manufacturing and mining activity.

The ratings agency left SA on the brink of “junk” status in November last year after it revised the outlook on the country’s last investment-grade credit rating to “negative”.

“Moody’s latest move should further heighten the rand’s sensitivity to Finance Minister Tito Mboweni’s budget speech on February 26,” said Lukman Otunuga, senior research analyst at FXTM.

“If the budget speech fails to offer the detail and insight Moody’s seek, South Africa could lose its last investment-grade credit rating – something that may send the rand tumbling.”

Bonds also weakened, with the yield on the 2030 bond up 3 basis points to 8.93 percent.

Stocks closed down, with the JSE Top40 index falling 0.83 percent to 51 922.16 points, and the broader all share index losing 0.81 percent to close at 57 714.66 points.

Gold stocks were among the only winners of the day on the blue-chip index, with Gold Fields and AngloGold Ashanti rising 3.69 percent to R96.43 and 2.02 percent at R298.56, respectively.

Meanwhile, flexible exchange rates may not be the most suitable shock absorber for emerging-market economies under pressure, the head of the IMF said, adding that a more country-specific policy mix might be needed.

In an opinion piece published in the Financial Times yesterday, Kristalina Georgieva said that addressing volatile capital flows could be daunting, because there was little consensus on the right combination and timing of policy measures.