Olivia Kumwenda-Mtambo | JOHANNESBURG

South Africa’s rand steadied against the dollar early on Friday as the market awaited a credit rating decision from Moody’s expected late in the day.

At 0649 GMT, the rand traded at 12.9425 per dollar, from its overnight close of 12.9200 on Thursday.

South Africa sank into recession in the first quarter and investors worry this will prompt further rating downgrades.

Moody’s — whose Baa2 rating is two notches above “junk” — placed South Africa on review for a downgrade in April after a controversial cabinet reshuffle saw respected finance minister Pravin Gordhan was sacked.

“Moody’s will almost certainly downgrade South Africa late this afternoon. The big question is whether they also keep the outlook as negative: we do not think so but it is a close call,” Rand Merchant Bank currency strategist John Cairns wrote in a note.

S&P Global Ratings cut South Africa’s foreign currency debt to speculative grade, while Fitch downgraded the country to “junk” for both foreign and local currency debt after the cabinet shake-up.

Market focus also on Britain where Prime Minister Theresa May’s Conservative Party lost its parliamentary majority in a general election.

Stocks were set to open slightly higher at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.23 percent.

In fixed income, the yield for the benchmark government bond due in 2026 added 2 basis points to 8.52 percent.

(Reporting by Olivia Kumwenda-Mtambo; Editing by Joe Brock)