Unexpected bounce in Chinese factory activity lifts South African rand ahead of Moody’s review

PUBLISHED: Fri, 01 Nov 2019 13:55:35 GMT

JOHANNESBURG – South Africa’s rand firmed on Friday as an unexpected bounce in Chinese factory activity helped offset concerns over prospects of a U.S.-China trade pact and skittishness ahead of a long-awaited decision on South Africa’s credit rating.

The rand traded at 15.0600 versus the greenback by 0505 GMT, 0.31% stronger compared with the previous day’s close.

The currency had been losing ground following a bleak budget speech on Wednesday, where Finance Minister Tito Mboweni slashed growth forecasts and predicted ballooning debt.

That raised fears that South Africa could lose its last investment-grade credit rating on Friday, when Moody’s is set to announce its ratings decision following a review, also knocking confidence in the rand.

However, investor sentiment was given a boost on Friday after a survey showed that manufacturing activity in China expanded at its fastest pace in more than two years in October, lifting Asian shares.

Throughout the day, though, the rand is likely to be driven by Moody’s decision. Peregrine Treasury Solutions said in a note there was no telling the impact a negative adjustment in its rating could have: “For now, it’s just sit back and hold tight, with a new support level of R15.00 having been set.”

Government bonds inched lower, with the yield on benchmark 2026 instrument rising 1 basis point to 8.505%.

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