Rand Firms As Markets Consider Downgrade Unlikely

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CAPE TOWN: The rand continued to firm for a second day on Thursday morning, as markets considered it unlikely that Moody’s will downgrade South Africa’s sovereign credit rating.  

At 10:00 on Thursday, the local currency was trading at R11.77 to the dollar, after opening at R11.83 to the greenback. On Monday, the local unit traded as low as R12.09/$. 

Ratings agency Moody’s is set to announce on Friday whether it will downgrade the country’s sovereign credit rating to junk. 

It is the only major ratings agency to not have downgraded South Africa to non-investment grade, and currently has the country at one notch above junk. Rival ratings agencies Fitch and S&P both downgraded SA to non-investment grade in 2017. 

Friday evening 

Moody’s has in the past made its South African credit rating decisions relatively late in the evening, but the agency could make the announcement at any time. 

Should it downgrade SA to non-investment grade, the country would automatically fall out of the Citi World Government Bond Index. 

If this happens, billions of rand are expected to leave SA, as foreign investors and index tracking funds sell their local bonds.