Rand edges firmer as post Moody’s begin to wane

The rand edged firmer early on Tuesday, extending a rally sparked by Moody’s decision to keep the country’s credit rating at investment grade despite a dismal budget last week showing a fast-rising budget deficit and public debt.

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At 09h00 the rand was up 0.3% at 14.77 per dollar, slightly off Monday’s best of 14.73, but still near the short-term 14.80 technical resistance level seen by traders as key to sustaining forward momentum.

Moody’s kept South Africa’s sovereign debt at Baa3, the lowest rung of investment grade, but revised the outlook on that rating to “negative”, citing a deterioration in the economic growth outlook and rising debt.

The rand has also been helped by a weaker dollar and optimism that the United States and China may be on the verge of reaching a preliminary trade agreement.

Traders warn that the rand’s surge may be short-lived, however, as investors assess the fiscal and economic growth risks outlined in the October 30 budget and the likelihood of Moody’s cutting the rating in its March credit review.