Johannesburg - South Africa's rand hit a six-year low against the dollar on Friday and bond prices slid on concern that ratings agency Fitch could downgrade the country's debt in its latest review.
The rand slumped nearly 1 percent to 11.7225 to the dollar as of 15.28 GMT, its weakest since October 2008. It recovered to 11.6800 by 16.00 GMT in volatile trade but was still down from Thursday's New York close of 11.6335.
Fitch is due to give the result of its review on Friday, as will Standard & Poor's, which like Moody's has already cut the country's rating this year.
“The threat of a Fitch downgrade and likely very downbeat outlooks from both presents the risk of generating even more rand-selling interest,” Tradition Analytics said in a note.
The rand has lost nearly 3 percent against the dollar in the past week, its biggest weekly drop since early September, as investors worry that a renewed power crunch and recent weak economic data could trigger a credit downgrade from Fitch.
“The crux of the decision will no doubt be the ... power constraints and the drag applied to growth and the fiscus through this, which we continue to see as a severe risk to the growth outlook in 2015.”
South Africa this month has suffered its worst power shortages since 2008 due to creaking infrastructure, power plant failures and emergency maintenance.
The local currency was also hurt on Friday by broad-based strength in the dollar after stronger-than-expected U.S. consumer sentiment data.
Government bonds had a bruising session, with the yield on the 2026 benchmark climbing to a month-high of 8.02 percent and closing at 7.975 percent, up 5.5 basis points from Thursday. - Reuters