Rand gains against greenbackCredit ratings have positive effect The South African rand gained traction following a credit rating affirmation by agencies Moody''s and Fitch. South Africa''s rand firmed to near three-week highs against the dollar and yields on government bonds fell on Monday after rating agencies Fitch and Moody''s affirmed the country''s investment-grade credit ratings.The market''s focus was also on scandal-plagued President Jacob Zuma, who is facing a vote of no-confidence by the ruling party''s executive committee.
Some analysts said Zuma''s hand would be weakened by the challenge even if he survived the vote - as expected - boosting sentiment in financial markets that see him as a liability.
Stocks fell led by a sell-off in the resources sector, as the rand''s recent strength made companies who earn the lion''s share of their revenue outside South Africa, among them mining firms, less attractive.
Fitch and Moody''s affirmed South Africa''s investment-grade credit ratings late on Friday.
At 1620 Greenwich Mean Time, the rand was at 13.7325 per dollar, a gain of 2.6% from its New York close on Friday. The currency was trading at its firmest levels since 10 November, according to Thomson Reuters data.
“The rand has had a gap open this morning which is likely due to the combination of a weaker dollar but also the positive news from the rating agencies,” Standard Bank chief currency trader Warrick Butler said in a note.
“If markets perceive that the president could be weaken, whether that happens or not is not irrelevant, if they believe it to be so then the currency will strengthen,” NKC Independent Economists political analyst Gary van Staden said.
Rand Merchant Bank analyst John Cairns however said that the markets should be cautious about expecting too much from the vote, “having been disappointed so often in the past.”
The yield for the benchmark government bond due in 2026 fell 25 basis points to 8.87% percent.
On the stock market, the Top-40 index fell 1.34% to 43,617 points while the broader all-share dropped 0.99% to 50,194 points. The mining sector fell 2.7% leading the bourse lower, with platinum miner Lonmin tumbling 4.5% to N$28.41. Further losses were curbed by a resurgent banking sector, which firmed by 3%, led by FirstRand whose shares rose 3.29 percent to N$52.17.
NAMPA/REUTERS