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Markets

South Africa's rand at 16-month high after Moody's makes no change

  • The rand rose by 0.36pc to 14.0000 against the dollar, its highest level since early January 2020, from its previous close on Friday of 14.0500.
Published May 10, 2021
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JOHANNESBURG: South Africa's rand rose to a 16-month peak against the dollar on Monday after Moody's left its sovereign ratings unchanged, while an improving local political environment and the global market risk-on sentiment provided further support.

At 1603 GMT, the rand rose by 0.36pc to 14.0000 against the dollar, its highest level since early January 2020, from its previous close on Friday of 14.0500.

"With Moody's leaving South Africa's rating and outlook unchanged as expected, the rand received a further boost," Annabel Bishop, chief economist at Investec, said in a note.

"The perceived improved political environment is also aiding the domestic currency as the clean up in government and the ruling party continues."

South Africa's governing African National Congress (ANC) suspended its Secretary General Ace Magashule last week in line with tougher rules for members charged with corruption and other serious crimes, who were told to "step aside" or vacate their positions within 30 days or face suspension.

On Monday President Cyril Ramaphosa said the party will further discipline Magashule, if he does not apologise for a letter he wrote resisting his suspension.

The rand was also boosted by bets that U.S. interest rates will remain low for some time. Lower U.S. interest rates boost the appeal of riskier but high-yielding currencies and weigh on the dollar.

The United States created a little more than a quarter of the jobs that economists had forecast last month and the unemployment rate unexpectedly ticked higher, curbing speculation about runaway inflation.

On the Johannesburg bourse, shares dropped, however, after the health ministry said on Saturday it had detected the first four cases of a new coronavirus variant that emerged in India and was responsible for a surge of infections and deaths in the Asian country.

South Africa's second wave was driven by its own variant that quickly dominated infections countrywide and closed certain parts of the economy, affecting tourism and retail-facing stocks.

The Johannesburg Stock Exchange's all-share index closed down 0.21pc at 68,377 points, and the blue-chip index dropped 0.29pc to 62,389 points.

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