Rand gets reprieve after plunging to two-year lows against the dollar
The rand enjoyed something of a reprieve in mid-morning trade on Thursday, strengthening slightly against the dollar while government borrowing costs climbed down from nine-month highs.
The relief rally in local assets coincided with the Moody’s report, noting that SA is in a technical recession. The weaker-than-expected economic performance adds to the fiscal and monetary policy challenges posed by the 20% depreciation of the rand against the dollar so far this year, the ratings agency said in a statement.
The rand has been caught up in the emerging-market storm, coming at a time when the US economy is in a good shape, allowing the US Federal Reserve to raise interest rates.
Moody’s had already warned prior to the recession that it expected the South African government would miss its fiscal targets for the year on the back of a low tax performance, the public-sector wage bill, and higher-than-budgeted interest payments.
The rand has been under intense pressure of late, falling to a new two-year low against the dollar on Wednesday, raising concerns about its effect on inflation, which is already in the upper end of the Reserve Bank’s 3% to 6% target range.
Brent crude has recently flirted with $80 a barrel, its highest since November 2014.
At 11.01am, the rand was at R15.3244 to the dollar, from R15.4235 on Wednesday. It was at R17.8269 to the euro from R17.9367,and at R19.8245 to the pound from R19.9098. The euro was at $1.1633 from $1.1630.
The yield on the benchmark R186 bond, meanwhile, eased to 9.185%, from 9.22%.
With Sunita Melon