The rand was on course for gains of more than 2% against the dollar this week, despite some profit-taking on Friday, after Moody’s signalled it was unlikely to strip South Africa of its last investment grade credit rating this year.
That marks a turnaround for the South African currency, which has been dragged sharply lower since early August by poor economic data and fears that currency crises in Turkey and Argentina could spark a mass exodus from emerging market assets.
Moody’s lead analyst for South Africa said on Thursday there was “little chance” the country would be downgraded at a rating review scheduled for next month.
Her comments were noticeably more upbeat than a Moody’s research report released after data showed last week that the economy fell into recession in the second quarter.
First National Bank (FNB) analysts said the more positive tone from Moody’s was a rare piece of good news for a country suffering from weak business confidence and policy uncertainty.
The reprieve from Moody’s “will allow South Africa time to address its fiscal imbalances and remain in the Citi World Government Bond Index,” FNB analysts said, referring to the risk that a downgrade could cause South African bonds to be ejected from one of the world’s major global bond indices.
At 1525 GMT the rand was 0.7% weaker at 14.88 versus the dollar. But it was 2.4% stronger than its close last Friday after rising for four straight sessions from Monday to Thursday.
Next week investor attention turns to the South African Reserve Bank (Sarb), which holds a monetary policy meeting on Sept. 20. All bar one of the economists polled by Reuters this week predicted that the SARB would leave its main lending rate at 6.5%, as it weighs economic weakness against a pickup in inflation.
On the Johannesburg bourse, stocks ended the week firmer, in line with global markets buoyed by expectations that the United States and China would open new trade talks.
The blue-chip top-40 index strengthened 0.90% to 50,441 points, while the broader All-share index was 0.74% firmer at 56,582 points.
“We are seeing fairly healthy markets on the back of the trade talks, and the local market seems to be following suit,” said Ryan Wood, equities trader at Independent Securities.
Among Friday’s top gainers, Investec soared almost 10% after it announced plans to spin off its asset management unit in a surprise restructuring.