Picture: Reuters.
HARARE - Moody’s Investor Services’ rating reprieve last week boosted market sentiment on the JSE yesterday, with the rand strengthening against major currencies and analysts predicting that it could hit the R11.50 level to the greenback.

The rand gained 0.65percent to trade at R11.66 against the dollar at 8am yesterday.

By 5pm, the rand was bid at R11.6581, registering one of the best performance among its peers.

Investec chief economist Annabel Bishop said the rand, however, remained vulnerable.

“Its recent strength has yet to be sustained, moving back above R12/$ recently, and the domestic currency could weaken just as quickly as it has strengthened over the turn of the year, should markets experience a marked risk-off period,” Bishop said.

The rand has strengthened more than 5percent against the dollar this year. Bishop said it had strengthened to R11.60/$, R14.35/ and R16.21/£ from R11.90/$, R14.67/ and R17.02/£.

On Friday South Africa dodged a downgrade, as Moody’s on Friday kept the country’s foreign and local currency rating unchanged at Baa3 in line with expectations.

The decision has helped South Africa avoid being excluded from the Citigroup World Government Bond Index.

Upgraded outlook

The exclusion could have led to outflows of as much as much as R100 billion. Moody’s also upgraded the outlook to stable from negative.

Meanwhile, all eyes are on the Monetary Policy Committee meeting tomorrow.

There is an exceptionally good chance that the repo rate will be trimmed by 25 basis points, according to Dr Adrian Saville, Cannon Asset Managers chief executive and founder.

“The most obvious explanation comes from the CPI figures - the economic variable that the central bank targets - which has moderated materially and that has been helped to a large extent by the strengthening in the rand over the last 18 months,” Saville said.

“Inflation has decelerated beyond expectations last month, slowing to 4 percent year on year from 4.4 percent in January. Inflation has remained inside 3 percent to 6 percent target band since April last year Given the strong rand, very tame inflation and the weak economy there is a reasonable case to be made for a rate cut.”