Rand extends losses amid junk-status threat
The rand was weaker against major global currencies on Monday morning, at a one-month low against the dollar, after being battered on Friday by looming threats of credit-ratings downgrades.
Fitch Ratings cut its outlook on SA’s debt to negative on Friday following the announcement of an additional R59bn in support for Eskom over the next two financial years.
Moody’s Investors Service hinted strongly earlier in the week that it could no longer remain silent on SA’s deteriorating debt picture, saying Eskom’s bailout was “credit negative”.
Rand weakness since Friday was largely due to local risks, said Standard Bank currency trader Warrick Butler in a note, as other emerging-market currencies had been generally stable since then.
“The rand should find some minor support at the 55-day moving average which is situated quite close to the opening level of R14.3392/$,” Butler said.
The next major resistance level was at R14.50/$ and a breach of this will not be good as it should then open the path to test R15.17, he said.
At 9.30am the rand had fallen 0.37% to R14.3159/$, 0.31% weaker at R15.92/€ and 0.11% softer at R17.6721/£. The euro was flat at $1.1121.
The benchmark R186 government bond due in 2026 had weakened, rising two basis points to 8.36%. Bond yields move inversely to bond prices.
Focus this week is on the US Federal Reserve policy announcement on Thursday, with the world’s most influential central bank expected to cut interest rates by 25 basis points.
The pricing in US sovereign bond markets suggests no more than a 17% chance for a 50-basis-point cut at this week’s monetary policy meeting, said London Capital Group senior market analyst Ipek Ozkardeskaya in a note. The market is also pricing in two more cuts over the next nine months.
Source: businesslive.co.za
