The rand was weaker against the dollar on Friday ahead of ratings decisions that could see the country’s debt downgraded to junk and kicked-out of global indices, triggering a massive selloff of local assets.
At 1515 GMT the rand had weakened 0.43% to 13.95 per dollar compared to close of 13.89 overnight in New York, weighed down mostly by fears over looming ratings decisions due later in the session.
Africa’s most industrialised country risks downgrades on its local currency debt rating from Moody’s and S&P Global on Friday. Both rate it on their lowest investment grade rung of Baa3/BBB-minus.
“In case of a rating downgrade we might see a wave of sales in domestic government bonds which would lead to considerable rand depreciation,” said foreign exchange analyst at Commerzbank Antje Praefcke.
Bonds were weaker, with the yield on the benchmark paper due in 2026 adding one basis point to 9.345%.
On the stock market, the benchmark Top 40 Index was flat at 53 998 points, while the broader All Share index was little changed at 60 321 points.
Investors stayed away from making any big moves ahead of the much anticipated ratings review.
Technical factors also weighed, with Thomson Reuters data showing momentum indicators for the main indices had strayed into overbought territory earlier this week. Such moves often herald a downward correction in the market.
Gold producers such as Harmony Gold, Sibanye-Stillwater and Gold Fields rose as the weaker rand supported the miners, making the companies’ shares more desirable. Resource firms make their earnings in dollar and pay their costs in rand.
Harmony gold rose 1.23% to R24.70, Sibanye-Stillwater increased 1.09% to R19.41, while Gold Fields was up 0.57% to R58.03.
Financial services firm Trustco Group Holdings topped the bourse, surging 43.45% to R7.83 after it said it will sell 20% of its holding company for the Namibian insurance and investment segment for R1.2 billion rand.