The rand staged a small recovery on Monday morning, helped by a very weak dollar. The rand fell sharply late on Friday, following a decision by S&P Global Ratings to downgrade SA’s rand-denominated debt to sub-investment grade. But Moody’s hit the pause button, saving SA billions of rand in potential bond outflows, after keeping its rating at investment grade. The rand lost as much as 27c to the dollar in the immediate aftermath of the S&P decision, before coming back slightly. The swift market reaction vindicated the Reserve Bank’s monetary policy committee, which unanimously chose to keep interest rates unchanged last Thursday. "The one-notch local-currency downgrade to sub-investment grade by S&P implies that South African bonds will fall out of the Barclays Global Bond Index, with estimated outflows of up to $2bn," Rand Merchant Bank analyst John Cairns and Isaah Mhlanga said in an e-mail note. "This is not hugely problematic for the rand market. However, the market’s pricing of...
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