WATCH: Rand shows amazing comeback strength
JOHANNESBURG – The rand began the week on a positive note and strengthened to a high of R14.7501 by 11.03am yesterday from Friday’s close of R15.02 as markets rallied in relief after Moody’s decision to maintain South Africa’s credit rating at an investment grade.
The rand strengthened 1.8 percent after losing 2 percent against the US dollar last week as investors rejected the Medium-Term Budget Policy Statement. By 5pm the rand was bid at 14.7803 to the dollar.
South Africa now has an opportune moment to lure investors in buying into the country's bold ambition to raise R1.2 trillion in new domestic and intentional investment over the next five years.
This week, President Cyril Ramaphosa will lead the government's hosting of the second South Africa Investment Conference, which is a partner initiative to the economic stimulus package and economic recovery plan.
Ramaphosa yesterday chaired the Working Committee meeting on implementation of the Jobs Summit commitments to expedite implementation and resolve inhibitors in the system in order to create jobs and stem job losses.
Senior research analyst at FXTM, Lukman Otunuga, said the move by Moody’s offered a key lifeline and ray of hope for the nation.
“Although the next few months will certainly be critical for Africa’s most industrialised economy, the rand is strengthening on the fact that South Africa has avoided a credit downgrade to junk,” Otunuga said.
“This positive sentiment continues to be reflected in the rand, which has appreciated more than 1.8 percent against the dollar yesterday. Given how the USD/ZAR is trading well below R15.00, the downside momentum could send prices towards R14.60.”
Director at TreasuryONE, Andre Cilliers, said although the rand had also made significant gains from global factors and recent developments, South Africa remained a hard sell for investors. “The possible trade agreements between the US and China are a positive sign for the rand, and the speculation of a further rate cut by the Federal Reserve placed the dollar on the back foot. Things are also looking positive since the EU approved the Brexit,” Cilliers said.
“However, South Africa is still not in a better position unless the government can convince investors how it is going to achieve economic growth and address Eskom problems. It’s the how and when that are important. The job is more difficult than it looks.”
The country is now just barely hanging on to its last investment grade credit rating from the last of the three key credit rating agencies.