Rand holds its own despite rating downgrade

folarin okunola

December 7, 2015 10:07 AM

The rand also took in stride central bank data showing South Africa's net gold and foreign exchange reserves were lower at $40.471 billion in November from $41.308 billion in October.

South African rand notes in a file photo. REUTERS/Siphiwe Sibeko

South Africa's rand was a touch firmer against the dollar on Monday despite last Friday's credit rating downgrade from Fitch, suggesting the market had largely priced in the move.

At 0647 GMT the rand was at 14.3405 against the greenback, up 0.21 percent from Friday's close at 14.3710.

Government bond however weakened, and the yield for the benchmark instrument maturing in 2026 climbed 5 basis points to 8.7 percent.

The rand held its ground in the face of Fitch cutting South Africa's sovereign credit rating by one notch to BBB- on Friday, the lowest investment grade category, citing the slowing economy and rising debt.

Peer Standard & Poor's kept its own rating at BBB- but changed the outlook to negative from stable, saying this reflected the view that economic growth might be lower than expected.

"Negative comments from Fitch and S&P were already largely priced into (the) weak exchange rate,"NKC African Economics said of the local currency's muted response.

Analysts however said the rand, like other emerging currencies, could be in for some year-end battering as the market braces for the likely start of policy tightening in the U.S. after upbeat payrolls data on Friday.

On the equities market, the JSE securities exchange's Top-40 futures index was up 0.8 percent, pointing to a strong open for the actual index at 0700 GMT.

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