Rand weakens further

Comment on this story
IOL world currency1 Graphic: Renjith Krishnan.

The rand slid for a fifth day on Friday and bond yields rose for the first day this week after Fitch Ratings cut South Africa’s rating because of slowing economic growth, a widening budget deficit and rising unemployment.

The currency declined as much as 0.5 percent, the weakest level since December 12, and traded 0.3 percent lower at R8.6721 a dollar by 10.37am in Johannesburg on Friday.

The rand has slipped 1.3 percent this week, the worst performance of major currencies tracked by Bloomberg.

Yields on benchmark 10.5 percent bonds due December 2026 jumped 6 basis points to 7.17 percent after falling 27 basis points in the previous four sessions.

Fitch reduced South Africa by one level to BBB, the second- lowest investment grade and on par with Brazil, Russia and Mexico, following cuts by Standard & Poor’s and Moody’s Investors Service last year.

The deterioration of the economy and budget deficit has exacerbated social tensions in the nation, which has seen farm worker protests this week and Harmony Gold consider closing its biggest mine on wildcat strikes and violence.

“Fitch raised more or less the same issues that the other two ratings agencies raised and they are quite correct to do so,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, and colleagues wrote in e-mailed comments.

“This is not good news for South Africa and this is justifiably reflected in the strong under performance of the rand overnight and this (Friday) morning. – Stephen Gunnion from Bloomberg

sign up

Comment Guidelines

  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.

  5. Verified email addresses: All users on Independent Media news sites are now required to have a verified email address before being allowed to comment on articles. You are only required to verify your email address once to have full access to commenting on articles. For more information please read our comment guidelines