JOHANNESBURG - The rand was weaker against the dollar yesterday ahead of ratings decisions that could see the country’s debt downgraded to junk and kicked out of global indices, triggering a massive selloff of local assets.
Stocks were down as Sasol and Naspers weighed.
At 5pm, the rand bid at R13.9002 to the dollar, 5.05c softer than at the same time on Wednesday, and down 0.72percent from a close of R13.80 in New York overnight.
The rand had opened on the back foot against the dollar following more dovish than expected minutes from the US Federal Reserve and worries over potential downgrades to “junk” of South Africa’s local credit ratings.
Moody’s and S&P Global Ratings are due to announce their rating decisions tonight. A one-notch cut in the local-currency rating by both agencies would be likely to trigger forced selling of up to $12billion (R166.8bn) of the country’s bonds.
Fitch, which already rates both South Africa’s local and foreign currency debt a notch below investment grade, kept its rating and stable outlook unchanged last Friday.
The rand hardly moved after central bank kept its benchmark repo rate at 6.75percent yesterday, citing the increased risks of inflation posed by currency weakness, possible credit downgrades and political jostling.
Bonds were firmer, with the yield on the benchmark paper due in 2026, down 5.5 basis points to 9.345percent.
On the stock market, the benchmark JSE Top40 index was down 0.92percent at 53995.77 points, while the broader all share index declined 0.75percent to 60298.16 points.
Sasol fell 1.55percent to R432.10 after the petrochemical firm said it would pull out of all its gas-to-liquids Greenfield projects including one in Louisiana expected to cost $13bn to $15bn.
Naspers declined for a second consecutive day, snapping a rally in which it hit record highs for five consecutive sessions. It lost 4.06percent to R3741.75.
Technical factors also weighed, with Thomson Reuters data showing momentum indicators for the main indices had strayed into overbought territory earlier this week. Such moves often herald a downward correction in the market.