Rand eyes R15 to the dollar as SA awaits Fitch rating, GDP data

The South African rand is looking set to break through R15 to the dollar again on Wednesday, having just recently drawn back under the psychologically important level.

The unit’s performance this week hinges on two important events taking place on Wednesday – the release of first quarter GDP data from Stats SA, and an announcement by Fitch ratings.

On Monday, the rand dipped back below R15 to the dollar thanks to weak US jobs data, and also buoyed by the announcement from S&P Global that it would be holding the country above junk status on Friday (3 June).

However, the reprieve for the currency could be short lived, as new economic data threatens to test the rand.

The rating announcement from Fitch is not expected to rock the boat, with economists predicting that the group will follow S&P and keep the country at BBB-, one notch above junk. However, the agency will likely change the outlook to negative, putting all eyes on the review later in the year.

A more likely key metric is the Q1 GDP data from Stats SA, which analysts believe is expected to show a contraction, following growth of only 0.4% in Q4 2015. This is once again sparking fears of a technical recession, considering the second quarter of the year is historically also a quarter of contraction.

Many sectors of South Africa are already in recession, including the mining, agricultural and manufacturing sectors. The agricultural sector has been especially hit hard, due to ongoing drought conditions across much of the country.

S&P said on Monday that it does not expect South Africa to enter into a technical recession any time soon, with the political unrest in the country being a more pressing focus point.

At 09:00am, the rand was trading at R14.93 to the US dollar. Stats SA will release the GDP data at 11:30am.

More on the rand

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Rand eyes R15 to the dollar as SA awaits Fitch rating, GDP data