Cape Town – The rand continued to firm in the early hours of Friday afternoon, as analysts remained cautiously optimistic that Moody’s would not downgrade SA’s sovereign debt to junk.
At 15:20 on Friday the local currency was trading at 11.76/$, up 0.75% on the day. It had opened at 11.85 to the greenback.
Ratings agency Moody’s is likely to announce on Friday whether it will downgrade SA’s sovereign credit rating to sub-investment grade.
“Market consensus is that Moody’s will refrain from downgrading South Africa and might even move to lift the negative watch, an expectation the rand is thoroughly enjoying,” said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions in a statement earlier in the day.
“While the Moody’s rate announcement is only due to take place on Friday evening, we expect to see the market price in the potential positive news, with the rand leaning towards a strengthened position during the day.”
NKC African Economics, in a research note, said it expected Moody’s to not downgrade SA’s debt to sub-investment grade. This would mean that South Africa would remain included in the important Citibank World Global Bond Index.
On Thursday Deputy Finance Minister Mondli Gungubele said that Treasury had recently conducted “very frank and honest discussions” with ratings agencies. “As a result of that, I anxiously, and with all humility expect something better, but that is their decision to make.”
If past rating announcements are anything to go by, Moody’s will reveal its decision during the evening on Friday.
There is an outside chance it will not make the decision on Friday.
* Sign up to Fin24’s top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER