South Africa‘s rand raced to its highest in over a week on Thursday, erasing all of the losses suffered after the economy slipped into recession, as a rate hike in Turkey and Moody’s decision to hold fire on a downgrade boosted demand.
At 12:15 GMT, the rand was 1.4% firmer at 14.77 per dollar, just shy of its session-best 14.70 touched immediately after Turkey’s central bank raised its benchmark rate by 625 basis points.
The Turkish lira firmed 6% following the decision.
Before that, the rand had been rising as easing tensions between the United States and China fuelled risk demand in early, low liquidity trade.
Moody’s comment at a conference in Johannesburg that it was unlikely to cut Pretoria’s foreign debt to sub-investment, despite last week’s surprise slide into recession, pushed the rand’s gains to more than 1%.
“Emerging market currencies have been moving as a basket recently and the Turkish central bank’s rate move was definitely a catalyst for the rand move. The Moody’s comment is the second catalyst,” said IG Markets strategist Shaun Murison.
“Overall sentiment remains negative around emerging markets as a whole. So this is likely a short term recovery, sort of the inverse of a dead cat bounce,” Murison said.
Moody’s warned any growth recovery would be slow and that commitment to fiscal consolidation would be key to maintaining the country’s rating.
Data on the day showing mining output had shrunk again, 5.2% year-on-year in July, hardly upset the currency, which is now trading back where it was before the recession data last Tuesday.
Bonds also gained, with the yield on benchmark government paper due in 2026 down 5.5 basis points to 9.14%.
Stocks, however, remained on the ropes, with the Johannesburg Stock Exchange’s Top-4- index down 0.23% to 49 662 points and the wider All-Share index 0.31% softer at 55 780 points.
The sell-off that battered emerging currencies in August has spread to global equities in September, with risk-shy investors flocking to the greenback and US treasuries.
The local bourse has seen five consecutive sessions of losses, with the decline particularly sharp among firms exposed to the local economy – mainly retailers, banks and miners.
On the day, drugmaker Aspen was down more than 20% to R217.94 after it announced the sale of its infant formula business.