Johannesburg - The rand surged to its strongest level against the dollar in more than a month and bonds advanced after Fitch Ratings affirmed South Africa’s investment-grade credit rating even as data showed the economy contracted in the first quarter.
The currency advanced a seventh straight day, gaining 1.5 percent to 14.6910 against the dollar at 1.53pm in Johannesburg, the strongest level on a closing basis since May 3 and erasing an earlier 0.5 percent decline. Government bonds rallied, with the yield on benchmark 2026 rand debt falling 6 basis points to 9.04 percent, while yields on South Africa’s $2 billion of Eurobonds due in 2025 dropped 3 basis points to 4.57 percent, the lowest since October 22.
Fitch kept South Africa’s rating at BBB- with a stable outlook, saying the country had made progress toward fixing power constraints and political risk was not out of line with its peers. The decision came five days after S&P Global Ratings also affirmed its investment grade ranking, with a negative outlook. The rating reprieve outweighed data that showed that gross domestic product shrank more than economists’ expectations in the three months through March.
“There’s a lot more value put on the Fitch decision than” the GDP data, said Wichard Cilliers, a trader at Treasuryone in Pretoria, who predicts the rand will extend gains to around 14.20 per dollar. “It was so positive, all the bad news from the GDP was just thrown out the window.”