The rand firmed on Tuesday, buoyed by improved investor appetite for riskier assets and comments from ratings agency Moody’s that the country is unlikely to suffer a credit downgrade to junk in the short term.
At 1520 GMT, the rand was 0.73% firmer at R14.66 per dollar, as appetite for riskier assets improved on rising hopes of global economic stimulus.
Moody’s said while a downgrade from Baa3 to sub-investment was unlikely in near-term, the slow pace of reform illustrated by ailing state power firm Eskom was a serious risk.
“Discussions between authorities and the agency have undoubtedly taken place and it seems the former has convinced the latter that progress is in the pipeline,” NKC African Economics analyst Jacques Nel said in a note.
“The importance of the mid-term budget can hardly be overstated. If it shows clear signs of a shift in policy in a more business-friendly direction, then we would expect Moody’s to affirm its current rating; if not, then the agency may change its outlook to negative.”.
South Africa’s mid-term budget is due in October, while Moody’s is scheduled to review the sovereign in November.
Moody’s is the last of the top three ratings firms to still rank Pretoria’s debt at investment grade, with a stable outlook.
Fitch and S&P Global Ratings already have its sovereign debt on junk status, and losing the last investment grade rating could trigger a selloff of billions of rands of bonds, pushing up already soaring government borrowing costs.
In equities, the Johannesburg All-Share was down 0.34% to 55,336 points, while the benchmark Top 40 index fell 0.24% to 49,485 points.
Dragging the bourse lower were resources as platinum stocks slipped 4.43% to 39.92 points and gold declined 1.64% to R22.45 as investors ditched the safe-haven assets.
Platinum producer Impala Platinum was down 5.97% to R81.05 rand, while Anglo American Platinum shed 3.66% to R839.81.
Bullion producer AngloGold was down 1.68% to R298.34, while Gold Fields shed 1.52% to R74.69, and Sibanye Stillwater slipped 2.66% to R17.20.
“When the commodities run, they tend to run all together, so when it overshoots a little bit, you know it’s due for a little bit of a correction,” said Gerhard Parkin, portfolio manager at BP Bernstein.
In fixed income, the yield on the benchmark 2026 issue was up 0.5 basis points to 8.13%.