Rand remains on shaky ground

File photo: Reuters

File photo: Reuters

Published Mar 4, 2015

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Johannesburg - South Africa's rand recouped some of the previous day's sharp losses on Wednesday, but remained on shaky ground after Fitch ratings agency warned of a possible credit downgrade this year.

At 07h14 GMT the local unit was trading at 11.7600 to the dollar, from Tuesday's New York close at 11.7615.

The local unit had fallen nearly 1 percent to 11.8175 on Tuesday, the softest it has been since February 12 according to Thomson Reuters data, after Fitch said it was more likely than not to cut South Africa's BBB rating.

Some analysts said the fall might have been overdone, as Fitch had merely reiterated existing concerns about South Africa's precarious fiscal position after Finance Minister Nhlanhla Nene's budget last week.

“A rating downgrade by (Fitch) is quite possible at mid-year, particularly as they already have us on negative rating watch,” RMB currency analyst John Cairns said.

“Remember, however, that this would still leave the country's investment grade. Downgrades from the other two agencies remain unlikely for now,” he said referring to Moody's and Standard and Poor's.

On Wednesday, market focus would primarily be on global service PMI figures, euro zone retail sales and the US ADP employment report, he added.

Government bonds weakened in early trade, nudging the yield on paper due in 2026, 6 basis points higher to 7.77 percent.

Reuters

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