South African rand, stocks gain; focus on Moody's review

• South Africa faces a potentially material 'slap on the wrists' by Moody's credit rating agency later today.
• There's no telling what kind of impact a negative Moody's credit rating adjustment could still do to the local currency.

JOHANNESBURG: South Africa's rand firmed against the dollar on Friday thanks to a weaker greenback, while stocks also rose on improved risk appetite, as markets awaited a Moody's rating review later in the day.

At 1515 GMT, the rand was 0.74% firmer at 14.9950 per dollar.

The US dollar dropped on Friday after data gave mixed signs on the economy, and as optimism the United States and China would reach a deal to end their trade war reduced safe-haven demand for the greenback.

Locally, focus was on the Moody's review.

"South Africa faces a potentially material 'slap on the wrists' by Moody's credit rating agency later today," Bianca Botes, a treasury partner at Peregrine Treasury Solutions said.

"There's no telling what kind of impact a negative Moody's credit rating adjustment could still do to the local currency."

Moody's is the only ratings agency out of the main three with an investment grade assigned to South Africa's sovereign debt.

Worries about losing it were sparked by the resumption of nationwide blackouts in Africa's most industrialized economy, and exacerbated by a medium-term budget that showed a wider deficit and rising debt.

A full downgrade to non-investment grade would see South Africa evicted from the benchmark World Government Bond Index (WGBI) of local currency debt and trigger a sell-off by investors mandated to buy high-grade debt.

Government bonds weakened, with the yield on the benchmark 2026 instrument adding 8 basis points to 8.575%.

On the bourse, stocks were up after strong economic data from China boosted appetite for emerging market shares despite investor jitters over Moody's review.

"I think the market is pricing in some kind of a downgrade or at least a negative outlook ... we'll have to wait and see what happens today," said Gerhard Parkin, portfolio manager for BP Bernstein.

The Top-40 index was up 0.52%, while the broader all-share was 0.41% higher.

Further gains were limited by gold mining companies, which were hit by lower gold prices as better-than-expected US jobs numbers and strong factory data from China bolstered sentiment for riskier assets.

Sibanye-Stillwater slipped by 2.71%, while AngloGold Ashanti closed down by 1.86%.