Rand buoyed by US inflation miss, stocks fall to 15-month low

South Africa’s currency firmed on Thursday, trading back at a one-week best as weak inflation numbers from the United States compounded a sharp Wall Street rout, re-igniting rand bulls ahead of Moody’s rating decision.

Stocks plunged to levels last seen in July 2017 amid a global market sell-off but losses were soothed by market heavyweight Naspers.

At 1530 GMT the rand was 0.95% firmer at 14.6400 per dollar, having sprinted to a session-best 14.5225, its firmest since Oct.3, soon after consumer price-growth data in the US underwhelmed.

The CPI miss reduced bets that US inflation is accelerating, pushing the greenback to a two-week low, allowing some emerging market currencies a breather.

The rand is however seen struggling to maintaining its gains, having failed to hold below technical resistance at 14.50 twice this week and the Moody’s rating review due on Friday posing significant event risk.

IHS Markit senior analyst Langelihle Malimela said Moody’s would likely wait until after the medium term budget on Oct. 26, to be delivered by newly-hired Finance Minister Tito Mboweni, before taking decisive action.

“Timing for the budget, its content, and specific funding arrangements for infrastructure development will be key indicators for policy direction, fiscal stability, and currency movements in the coming months,” Malimela said.

Bonds were weaker as U.S treasuries continued to draw the bulk of fixed income action. The yield on the benchmark paper due in 2026 rose 3 basis points to 9.27%.

The All-Share index fell 1.11% to 52,229 points while the blue chip Top-40 index was 1.23% weaker at 46,050 points.

“Global markets have been hit by investors’ risk-off sentiment. Naspers could have faired worse considering Tencent was down around 7%,” said Kyle Burgess, portfolio manager at Nedbank Private Wealth.

Naspers, which owns a 31.2% stake in Hong Kong tech firm Tencent, closed 0.9% higher to 2,609 rand despite its Chinese parent diving 6.8% as Asian shares plunged to 19-month lows.

“Another factor weighing on global markets is the IMF cutting its global economic outlook for the first time in more than two years,” Vestact analysts said in a note.

The International Monetary Fund on Tuesday lowered its global growth forecasts for 2018 and 2019, saying the U.S-China trade war was taking a toll and emerging markets were struggling with tighter liquidity and capital outflows.

Bullion stocks leapt 10.24% as gold prices were buoyed by the market selloff and softer dollar.