Rand slips back into range as trade jitters resurface

South Africa’s rand weakened on Monday, giving up small early gains as uncertainty over a trade agreement between the United States and China outweighed relief from S&P’s decision to only downgrade the outlook, not the rating, on the country’s debt.

At 1545 GMT the rand was 0.17% weaker at 14.76 per dollar, having hit a session-best 14.66 in the initial reaction to Friday’s late-night decision by S&P Global Ratings to move the outlook to “negative” from “stable”.

S&P, which along with Fitch already ranks South Africa’s debt at junk, cited flagging economic growth, mounting public debt and bailouts to state power firm Eskom as the main risks.

The decision not to cut the ratings, along with South Africa’s still-attractive yield after the central bank resisted calls to lower interest rates on Thursday, shielded the rand from a knee-jerk selloff.

But lingering uncertainty, and investor nervousness, over the ongoing Sino-US trade dispute, kept the risk demand cool and big-money bets on the sidelines, despite indications from a US official that a trade deal by year-end was still a possibility.

Bonds also weakened, with the yield on the benchmark 2026 paper up 5 basis points to 8.47%.

On the bourse, stocks rose slightly along with emerging market bourses after investors traded cautiously on optimistic trade talk news, but turned slightly down after the International Monetary Fund warned that South Africa faces risk of prolonged weak economic growth.

The benchmark JSE Top-40 Index was slightly down 0.15% to 50 409.21 points while the broader All-Share Index nudged down 0.13% to 56 687.47 points.

“Our banks are down today and the reason might be because of the economic slowdown,” said Robert Cameron, private client trader at Thebe Stockbroking.

Financials were the biggest losers on the blue-chip index with Discovery down 4.27% and Nedbank down 4.15%.

Preventing further losses were oil companies Exxaro and BHP Billion rose by 1.97% and 1.93% respectively off the back of a firmer oil price.