Mfuneko Toyana | JOHANNESBURG
South Africa’s rand extended losses on Wednesday as investors worried that news of the first recession in eight years could prompt further credit rating downgrades.
At 0640 GMT, the rand traded at 12.8700 per dollar, 0.4 percent weaker than its close of 12.8225 overnight in New York.
South Africa entered recession for the first time in eight years as manufacturing and trade sectors saw sharp downturns, with growth contracting 0.7 percent in Q1 2017 after shrinking 0.3 percent in Q4 2016.
“The sharply negative GDP print will catalyse further credit ratings downgrades, probably sooner than we had previously anticipated,” said analyst at Nedbank Capital Reezwana Sumad.
Moody’s expected to release ratings decision on Friday.
Net foreign reserves rose to $42 billion in May, due in part to depreciation of the dollar vs most major currencies, the Reserve Bank said on Wednesday.
Government bonds were weaker, with the yield on benchmark paper due in 2026 up 4 basis points to 8.525 percent.
Stocks were set to open flat at 0700 GMT, with the JSE securities exchange’s Top-40 futures index down 0.1 percent.
(Reporting by Mfuneko Toyana; Editing by Joe Brock)