The rand firmed early on Thursday against a weaker US dollar, despite S&P Global’s late-night announcement that it had downgraded its outlook on South Africa.
At 0654 GMT, the rand traded at 18.58 to the dollar, more than 0.2% stronger than its previous close. The previous day it hit 18.72, the lowest in almost three years.
The dollar was down almost 0.1% against a basket of global currencies, after reaching a 2023 high in the previous session on hawkish comments from US Federal Reserve Chair Jerome Powell.
Investors will now be looking to US jobs data due on Friday for confirmation that strong jobs growth supports bigger interest rate increases.
S&P Global said late on Wednesday that it had downgraded South Africa’s outlook to “stable” from “positive”, citing infrastructure constraints and severe power cuts.
The downgrade followed disappointing gross domestic product data released earlier this week, which showed South Africa’s economy contracted more than expected in the last quarter of 2022 and could be on track for a recession if it shrinks again this quarter.
“The news by S&P, although negative, is priced in and changes little,” said ETM Analytics in a research note.
“With so much negative news around, the surprise would’ve been if S&P did not cut the outlook.”
The government’s benchmark 2030 bond was slightly weaker in early deals, with the yield up 2 basis points to 10.185%.