Rand weakens on speculation of Moody's ratings downgrade
Moody’s is the only one of the three big ratings agencies that has not yet announced its outlook
The rand was weaker at midday on Tuesday amid speculation that ratings agency Moody’s would soon downgrade SA one notch with a negative watch.
Moody’s is the only one of the three big ratings agencies that has not yet announced its outlook. S&P Global Ratings and Fitch downgraded SA to junk status in the first week of April.
Moody’s has not said when it will make its announcement‚ with Finance Minister Malusi Gigaba engaging with the ratings agency since April.
Nomura analyst Peter Attard Montalto said the speculation was that Moody’s may downgrade in coming weeks without a visit to SA.
He said the original view was Moody’s analysts would visit SA sometime towards the end of May and then report at mid-June before its July 3 window deadline.
"This would take the market by surprise regarding the timing‚ not the move‚" he said. The consensus seems to still be a one-notch downgrade‚ maintaining a negative watch‚ he said.
At 11.37am the rand was at R13.6670 to the dollar from a previous R13.6135. It weakened to R13.7095 in early morning trade.
The rand was at R14.8969 against the euro from R14.8805 and at R17.6626 against the pound from R17.6191.
The euro was at $1.0899 from $1.0931.
Nedbank Corporate and Investment Banking analysts said Moody’s was likely to downgrade both the local-currency and foreign-currency credit ratings by one notch respectively‚ to Baa2‚ one notch above investment grade.
They were also likely to keep a negative outlook‚ with continued fiscal slippage‚ higher debt-to-GDP levels‚ an increase in contingent liabilities‚ sustainably low GDP growth and economic policy uncertainty presenting downside risks‚ Nedbank said.
The rand was also under pressure from a stronger dollar‚ with the greenback making further inroads into the euro on upbeat views on the US economy.