Rand supported by S&P outlook upgrade

The rand was slightly stronger early on Monday, supported by ratings agency S&P upgrading the country’s sovereign outlook to “positive”.

S&P on Friday revised its outlook from “stable” and affirmed the foreign and local currency ratings on favourable terms of trade and a path toward contained fiscal expenditure.

At 0715 GMT, the rand traded at R15.83 against the dollar, less than 0.1% firmer than its previous close.

“The main take-home point from S&P’s improved outlook is that it is unlikely that the next rating move will be a downgrade,” ETM Analytics said in a research note. “S&P’s upgrade … could add to the tailwinds provided by the South African Reserve Bank’s 50 basis point rate hike last week,” it added.

South Africa’s central bank on Thursday increased its main lending rate by the largest margin in more than six years as it stepped up efforts to fight inflation, sending the rand higher.

On the Johannesburg stock market, the Top-40 index was up around 1.2% in early trade. The government’s benchmark 2030 bond also rose, with the yield falling 5 basis points to 9.71%.