Rand. Picture: REUTERS
Rand. Picture: REUTERS

The rand slipped slightly on Thursday morning, a day after the budget, which may have bought SA enough time to dodge another credit-rating downgrade bullet.

Markets cheered in the in immediate aftermath of the budget, which Finance Minister Malusi Gigaba tabled in Parliament on Wednesday.

As predicted, Gigaba announced deep cuts in public spending, as well as increases in personal income taxes and value added tax to stabilise to the country’s finances.

But not everyone was as convinced, with ETM Analytics economist George Glynos tweeting: "Budget score: 3/10. More of the same as SA heads closer to fiscal cliff, downgrade guaranteed." Moody’s will release the results of its ratings review soon, which could still upset the apple cart. Should Moody’s downgrade SA’s credit rating to subinvestment grade, local bonds will fall off international bond indices, prompting automatic selling by institutional investors.

"Expect pressure to be brought to bear on those responsible for reviving the economy," Ashley Dickinson, head of head of fixed-income dealing at Sasfin Wealth, said.

"In the near term though, the market may have much of this [budget] content in the price, and although recent gains may hold, further appreciation in market asset classes could meet with resistance." The revival of the dollar was also back in focus, thanks to gradual increases in US government bond yields. The yield on the benchmark US Treasury note was at 2.93%, its highest level in four years.

The stronger dollar and high yields on the US put some pressure on emerging markets, including the rand.

At 9.30am, the rand was at R11.6976 to the dollar from R11.6646, R14.3485 to the euro from R14.3275 and at R16.2356 to the pound from R16.2330. The euro was at $1.2267 from $1.2283.