The rand continued its rally in mid-morning trade on Monday, seemingly buoyed by Moody’s inaction on South Africa on Friday.
“The rand is demonstrating some of the market’s relief following no action by Moody’s last week, with it clawing back some ground during the overnight trade on Sunday,” said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions.
The ratings firm is the last of the big three ratings agencies to have South Africa above full junk status, and many were anticipating some sort of opinion to follow weeks of load shedding, a cut in GDP growth forecast, and the most recent MPC decision to hold rates.
Andre Botha, senior dealer at TreasuryONE, said: “The market waited in bated breath on Friday for the release of Moody’s credit rating review and the news passed more with a whimper than a cannon blast. Moody’s did not release a statement on South Africa, which means by default that Moody’s kept their rating unchanged.
“We expect the Rand to be sticky on the way down as importers who have sat on their hands climbing in at around the R14.30 level,” he said.
Positive EM sentiment could see the rand drifting lower and a test of the R14.20 level, Botha added.
“However, we have seen Turkey causing some concern in the EM space and with their elections that happened over the weekend. As we are awaiting some results during the day it could feed into the rand market and headline risks are very much in play.”
Moody’s is expected to wait until after the national elections in May to update the country’s grade status.
The rand traded at the following levels against the major currencies:
- Dollar/Rand: R14.25 (-1.73%)
- Pound/Rand: R18.65 (-1.36%)
- Euro/Rand: R16.02 (-1.46%)