Rand weakens as Moody’s relief rally fades

The rand weakened against a firmer US dollar in afternoon trade on Tuesday, retreating from a one-month high hit earlier in the session after Moody’s rating action relief.

Stocks were little changed as investors digested Moody’s update, with the Johannesburg All-Share index hovering over the red side at some point before closing up slightly.

At 1553 GMT the rand was 0.72% weaker at R14.26 per dollar compared to its close of R14.16 in New York on Monday.

The currency had reached a session high of R14.07 earlier, its strongest level since March 1, after Moody’s said South Africa’s sovereign credit rating was still investment grade, several days after the ratings agency delayed a review of the country’s creditworthiness.

Moody’s is the last of the big three ratings agencies to give South Africa an investment-grade rating, so markets are sensitive to any pronouncement it makes on the fiscal and economic strength of Africa’s most industrialised economy.

But the gains were erased as traders took a detailed look at Moody’s report, with a firmer dollar after robust US economic data also hurting the currency.

“Nothing new came through the (Moody’s) report. It was what we already know. The rand saw a reprieve shortly after but I think the reason it shot back up was because it wasn’t saying much,” said TreasuryONE senior currency dealer Andre Botha.

Bonds also weakened, with the yield on benchmark government paper due in 2026 adding 2.5 basis points to close at 8.52%.

In the equities market, stocks changed little, with the All-Share index up 0.08% to 57,158 points, while the Top 40 index rose 0.14% to 50,952 points.

Gold stocks capped further gains, as gold prices held near a four-week low as robust economic data from the United States and China boosted demand for the dollar and riskier assets.