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Moody’s downgraded South Africa’s sovereign credit rating to junk status on Friday evening and this has left has left government concerned and trembling in its boots to what extent that this might have on the economy. The downgrade coupled with the COVID-19 fears is bringing much stress to the rand as well as the markets. Joining CNBC Africa to unpack it all is Rashaad Tayob, Fund Manager at Abax Investments and Jacques Celliers, CEO of FNB.

Moody’s downgrades SA to junk status – what does this mean for the economy?

JOHANNESBURG (Reuters) &#8211; Moody’s will cut South Africa’s sovereign credit rating later on Friday as a recession deepened by the impact of coronavirus frustrates economic reform efforts aimed at reducing government debt, a Reuters poll of economists found.



Taken in the last three days, the survey showed 12 of 18 respondents saying Moody’s, the only major credit rating agency that still rates South Africa’s bonds as investment-grade, will cut them to “junk” status. Standard &amp; Poor’s and Fitch both cut their ratings to junk nearly three years ago. 



Eleven economists who answered an extra question said the rating was “still relevant” despite a punishing market sell-off that has overshadowed the long-awaited decision, while five said it was “important”. Only two said whether or not Moody’s downgrades the bonds to junk was “irrelevant.” 



“It may not be a market-moving event at this juncture but is important going forward as sub-investment grade from all three rating agencies will undoubtedly raise the cost of capital or funding in South Africa,” said economist Hugo Pienaar at the Bureau for Economic Research. 



The rand, stocks and bonds have been under intense pressure as the pandemic hits asset prices. But many analysts say South African assets have been trading as though they are junk-rated for at least a couple of years already. 



“In our view, the Moody’s downgrade itself has for some time been discounted by financial markets, though it remains uncertain exactly what impact the subsequent World Government Bond Index (WGBI) expulsion will have,” said Elna Moolman, economist at Standard Bank. 



“Guided by global examples in this regard, it is possible that the bulk of the repricing has already occurred.” 



With the virus still spreading, in a worst-case scenario, median forecasts showed South Africa’s economy would shrink by 4% in Q1, 8% in Q2 and 5% in 2020 as a whole, according to the median forecasts from answers to an additional question. 



The last Reuters poll prior to the announcement of the 21-day lockdown for South Africa that started on Thursday evening predicted the economy would shrink 0.4% in Q1, then grow 0.9% in Q2 and 0.3% for the year as whole. 



“As the country enters a minimum of a three-week lockdown period it means domestic fiscal metrics are likely to get significantly worse this year, with sovereign debt ratios now almost certain to rise,” said Jeffrey Schultz, economist at BNP Paribas.



South African assets recovered on Wednesday after the central bank launched a bond-buying programme, seeking to drum up demand in credit markets as the coronavirus epidemic weighs on the ailing economy. 



Christopher Shiells at Informa Global Markets said a downgrade to junk status would probably be seen as a relief by the government as it would free it up to make a significant fiscal response to the crisis. 



“Rating agencies are expected to downgrade a number of sovereigns due to the coronavirus. Outflows and asset weakness have been occurring over last month, so the worst has already happened in that sense,” he said. 



(Editing by Ross Finley and Catherine Evans)



This article was first published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN21E150-OZABS">https://af.reuters.com/article/investingNews/idAFKBN21E150-OZABS</a> and is republished with its permission.



For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>

Moody’s to cut South Africa’s sovereign credit rating to junk – economists

JOHANNESBURG (Reuters) &#8211; South Africa’s rand held steady in early trade on Friday as a pause in the global selloff of risk assets, triggered by panic over the coronavirus and tumbling oil prices, gave investors a chance to reassess positions ahead of the weekend. 



As of 0645 GMT, the rand was 0.69% firmer at 16.4500 per dollar, compared with Thursday’s session-low of 16.6150. 



The mood in financial markets improved somewhat on Friday, with Asian equities staging a recovery and U.S. stocks futures pointing to a firmer start on Wall Street as attention turned to a U.S. stimulus package. 



The turnaround came after assets across the developed and emerging markets saw record sell-offs on Thursday as investors scrambled for safe-havens even after the European Central Bank announced stimulus measures to fight the economic fallout from the coronavirus outbreak. 



Locally, stocks recorded their worst single-day fall in more than 22-years in the previous session, bonds saw their biggest selloff on record, and the rand hovered around the 16.50 mark, a level seen as a bearish technical gauge, especially with dollar back in vogue. 



The U.S. Federal Reserve’s move to pump $1.5 trillion of liquidity into the banking system quickened the flight to the greenback, but Friday was likely to see some profit-taking, traders said. 



“The rand has managed to make back some modest ground in early trade. Whether or not this can be sustained will depend on how risk conditions hold up as the markets remain fixated on coronavirus headlines,” economists at ETM Analytics said in a note. 



Bonds remained on the ropes with the yield on the government issued 2030 paper up 6 basis points at 9.855%. 



(Reporting by Mfuneko Toyana; Editing by Aditya Soni)



This article was fisrt published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN210102-OZABS">https://af.reuters.com/article/investingNews/idAFKBN210102-OZABS</a> and is republished with its permission.

South Africa’s rand steady as coronavirus-induced sell-off pauses

KEY POINTS



<ul><li>The South African rand plunged over 4% against the dollar to R16.28, as it reported <a href="https://www.cnbcafrica.com/article/2020/03/07/sas-richest-province-reports-first-case-of-covid-19/">three cases</a> of covid-19 and <a href="https://www.cnbcafrica.com/coronavirus/2020/03/06/moodys-cuts-sas-growth-forecast-on-the-back-of-coronavirus/">Moody&#8217;s cut its growth forecast</a>. </li><li>The Australian dollar fell as much as 2.60% against the greenback to $0.6476, while the New Zealand dollar tumbled by as much as 2.28% to change hands at $0.6228.</li><li>The Korean won declined more than 1% against the dollar, prompting South Korea’s finance ministry to issue a verbal warning against “excessive” movements in the currency market, according to a Reuters report.</li></ul>



<a href="https://www.cnbc.com/weizhen-tan/">By Weizhen Tan</a><a rel="noreferrer noopener" href="https://twitter.com/weizent" target="_blank">@WEIZENT</a> Major Asia Pacific currencies dropped against the U.S. dollar on Monday morning, as investors took a risk-off approach with volatility across markets shooting up over an oil price war.



The&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=AUD=">Australian dollar</a>&nbsp;fell as much as 2.60% against the greenback to $0.6476, while the&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=NZD=">New Zealand dollar</a>&nbsp;tumbled by as much as 2.28% to last change hands at $0.6228.



The&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=KRW=">Korean won</a>&nbsp;declined more than 1% against the dollar, prompting&nbsp;<a href="https://www.cnbc.com/korea/">South Korea’s</a>&nbsp;finance ministry to issue a verbal warning against “excessive” movements in the currency market, according to a Reuters report.



“We’re closely monitoring speculative transactions that seems to be taking advantage of unstable market sentiment. The herd-like behavior (in the won) seems excessive short-term,” a finance ministry official told Reuters. Investors tend to regard phone messages from foreign exchange authorities as official verbal interventions in the onshore currency market, according to Reuters.



Meanwhile, investors flocked to the safe-haven&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=JPY=">Japanese yen</a>&nbsp;which soared more than 3% against the dollar to last settle at 102.10, dramatically strengthening from levels above 108 early last week.



But&nbsp;<a href="https://www.cnbc.com/japan/">Japan’s</a>&nbsp;Finance Minister Taro Aso warned against investors rapidly driving up the yen, saying the government will watch the currency spike closely, describing them as “nervous moves,” according to Reuters.



“We must watch currency and stock market moves for a while. We’ll examine&nbsp;them carefully,” Aso told reporters, according to the report. He declined to comment on whether Japan needs to intervene in the currency market.



Turmoil across markets spiked on Monday during Asia hours.&nbsp;<a href="https://www.cnbc.com/2020/03/08/oil-plummets-30percent-as-opec-deal-failure-sparks-price-war-fears.html">Oil prices plunged as much as 30%</a>, with&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=@CL.1">U.S. West Texas Intermediate crude futures&nbsp;</a>briefly falling to $27.95 per barrel. It came&nbsp;after OPEC’s failure to strike a deal with its allies regarding production cuts. That caused&nbsp;<a href="https://www.cnbc.com/id/10000304">Saudi Arabia</a>&nbsp;to slash its prices as it reportedly gets set to ramp up production, leading to&nbsp;<a href="https://www.cnbc.com/2020/03/08/opec-deal-collapse-sparks-price-war-20-oil-in-2020-is-coming.html">fears of an all-out price war</a>.



Dow futures followed the same trajectory,&nbsp;<a href="https://www.cnbc.com/2020/03/09/10-year-treasury-yield-plunges.html">tumbling more than 1,000 points, with the 10-year Treasury yield dropping below 0.5%</a>&nbsp;for the first time ever as price war fears coupled with coronavirus concerns sent investors flocking to safety.



<a href="https://www.cnbc.com/2020/03/09/asia-markets-oil-prices-coronavirus-currencies-in-focus.html">Markets across Asia dived</a>&nbsp;on Monday morning.&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=.N225">Shares in Japan</a>&nbsp;plummeted more than 6%, while Hong Kong’s&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=.HSI">Hang Seng index</a>&nbsp;dropped almost 4%.&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=.KS11">South Korea’s markets</a>&nbsp;declined more than 4%.



<a href="https://www.cnbc.com/australia/">Australian</a>&nbsp;markets also tumbled nearly 6%, with energy stocks taking a beating.



— CNBC’s Pippa Stevens and Yun Li contributed to this report.



This article first appeared on CNBC <a href="https://www.cnbc.com/2020/03/09/asia-pacific-fx-australian-dollar-new-zealand-dollar-korean-won-tumble.html">https://www.cnbc.com/2020/03/09/asia-pacific-fx-australian-dollar-new-zealand-dollar-korean-won-tumble.html</a> and is republished with its permission

Currencies in South Africa, South Korea, Australia and New Zealand crumble as market volatility shoots up

By Bianca Botes, Treasury Partner at Peregrine Treasury Solutions



The rand has come under pressure as the first case of the COVID-19 coronavirus has been confirmed in South Africa.



The markets are on edge, with many questioning the ability of government to deal with a breakout in SA efficiently. The currency weakened 1.4% during the course of Thursday, trading at R15.46/$, R17.30/€ and R19.99/£.



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="361" height="179" src="https://www.cnbcafrica.com/wp-content/uploads/2020/03/image.png" alt="" class="wp-image-362066" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2020/03/image.png 361w, https://cms.cnbcafrica.com/wp-content/uploads/2020/03/image-300x149.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2020/03/image-324x160.png 324w" sizes="(max-width: 361px) 100vw, 361px" /><figcaption>RAND DIVES ON COVID-19 CASE </figcaption></figure></div>



READ: <a href="https://www.cnbcafrica.com/news/2020/03/05/south-africa-confirms-first-case-of-covid-19/">South Africa confirms first case of COVID-19</a> ­ 



READ: <a href="https://www.cnbcafrica.com/coronavirus/2020/03/03/here-are-some-tips-on-staying-safe-from-the-coronavirus/">Here are some tips on staying safe from the #coronavirus </a>



READ: <a href="https://www.cnbcafrica.com/coronavirus/2020/02/28/the-novel-coronavirus-frequently-asked-questions/">The Novel Coronavirus: frequently asked questions </a>

Clarification on COVID-19 “hotspots” as SA moves to level 3 lockdown

First confirmed coronavirus case in SA sends rand diving

PRETORIA, March 3 (Reuters) &#8211; South Africa entered its second recession in two years in the final quarter of last year, as agriculture, transport and construction contracted, data showed on Tuesday.



Statistics South Africa (Stats SA) said the economy shrank 1.4% in the fourth quarter, following a revised 0.8% contraction in the third quarter.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="761" height="576" src="https://www.cnbcafrica.com/wp-content/uploads/2020/03/GDP.jpg" alt="" class="wp-image-361745" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2020/03/GDP.jpg 761w, https://cms.cnbcafrica.com/wp-content/uploads/2020/03/GDP-300x227.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2020/03/GDP-80x60.jpg 80w, https://cms.cnbcafrica.com/wp-content/uploads/2020/03/GDP-696x527.jpg 696w, https://cms.cnbcafrica.com/wp-content/uploads/2020/03/GDP-555x420.jpg 555w" sizes="(max-width: 761px) 100vw, 761px" /></figure>



Economists polled by Reuters had predicted a contraction of 0.1% in quarter-on-quarter and seasonally adjusted terms.


		
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&#8220;The economy is in recession again. That is two consecutive quarters of contraction, after being in recession in the first two quarters of 2018,&#8221; Joe de Beer, Stats SA&#8217;s deputy director-general for economic statistics, told reporters.



On a quarter-on-quarter basis, agriculture declined 7.6%, transport 7.2%, construction 5.9%, electricity 4% and retail 3.8%, the data showed.



Gross domestic product overall shrank 0.5% year-on-year in the fourth quarter after expanding 0.1% the quarter before. The economy expanded 0.2% in the 2019 calendar year compared with 0.8% in 2018.



South Africa has struggled to emerge from an economic slump in the two years since Cyril Ramaphosa became president, promising sweeping reforms.



The Treasury has cut 2020 economic growth forecast to 0.9%. 



(Reporting by Mfuneko Toyana and Tumelo Modiba; writing by Olivia Kumwenda-Mtambo; editing by Larry King)

South African economy enters recession, what you need to know

JOHANNESBURG &#8211; 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%.



Reporting by Emma Rumney; Editing by Aditya Soni

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

JOHANNESBURG, Oct 16 (Reuters) &#8211; South Africa&#8217;s rand tumbled more than 1% on Wednesday to its softest level in a week after state power utility Eskom said it would implement nationwide blackouts for the first time in more than six months due to capacity shortages.



The rand was 1% weaker at 15.0550 per dollar, its lowest since Oct. 10, as of 0615 GMT.



Eskom said it will cut up to 2,000 megawatts of power from the national grid on Wednesday due to a shortage of generating capacity, starting at 0700 GMT (9 am local time) and up until 2100 GMT.



The comments pushed the rand past the crucial 15.00 mark, with deeper losses likely as the session wears on, traders said.



Struggling state power firm Eskom implemented one of the worst power cuts in several years in February, hurting small businesses without backup power generators and industrial firms that consume large volumes of power.



&#8220;There was an initial knee-jerk reaction to the announcement. And the longer it (blackouts) goes on, the worse it will be for the rand,&#8221; said currency dealer at TreasuryOne Andre Botha.



&#8220;Any improvement (in sentiment) will depend on clarity we get from now on about what is happening. But there&#8217;s definitely negative risk across the board,&#8221; Botha said.



A debilitating round of power cuts in February and March pushed first-quarter economic growth into contraction and raised the likelihood of the country losing its last investment-grade rating.



Bonds also weakened, with the yield on the benchmark government paper due in 2026 up 3.5 basis points to 8.27%. 



(Reporting by Mfuneko Toyana, Editing by Sherry Jacob-Phillips)

South Africa’s rand takes a tumble as Eskom plans nationwide power cuts

JOHANNESBURG (Reuters) &#8211; South Africa&#8217;s rand inched slightly up in early trade on Monday, holding near a 3-week high it hit in the previous session, as risk sentiment strengthened following signs of progress in U.S.-China trade talks and a Brexit breakthrough.



At 0610 GMT, the rand was 0.05% firmer at 14.7470 per dollar, not far from Friday&#8217;s rally to 14.7100. 



On Friday, U.S. President Donald Trump said the United States and China had reached a &#8220;Phase 1&#8221; trade deal and suspended a threatened tariff hike, spurring a rally of emerging market currencies led by the rand.



In South Africa, with no local data due in the session, positioning will continue to be influenced to by offshore developments, traders said.



&#8220;The current levels of the local unit likely to attract some dollar buying interest, technically an attempt on 14.6000 remains a likely scenario,&#8221; traders at Nedbank said in a note.



Reports on Friday that European Union and Britain would hold intense talks over the next few days to secure a deal for Britain&#8217;s departure from the bloc as the Oct. 31 deadline looms large, also helped demand for currencies. 



Bonds were slightly firmer, with the yield on the benchmark paper due in 2026 down 0.5 basis points to 8.23%. 



(Reporting by Mfuneko Toyana; Editing by Rashmi Aich)

South Africa’s rand steady following signs of progress in U.S. – China trade talks

JOHANNESBURG (Reuters) &#8211; South Africa’s rand strengthened against the dollar on Monday, with momentum reignited by upbeat remarks from the U.S. Federal Reserve chairman and a Chinese economic stimulus package.



At 0734 GMT the rand was 0.34% firmer at 14.7700 per dollar from an overnight close of 14.8200.



Fed Chair Jerome Powell said on Friday in Zurich the central bank will continue to act “as appropriate” to sustain the economic expansion in the world’s biggest economy, sticking to a phrase that financial markets have read as signalling further interest-rate reductions ahead.



Powell’s remarks came as the Chinese central bank moved on Friday to cut how much cash banks must hold in reserve, releasing liquidity to shore up an economy hit by the Sino-U.S. trade conflict.



Easing policy is also expected in the Eurozone later this week when the European Central Bank (ECB) governing council meets.



“Risk-on trading patterns stemming from this move will be positive for emerging market assets this week,” Rand Merchant Bank’s Siobhan Redford said in a note.



Locally, investors will this week set their eyes on manufacturing and mining production data, which will provide an indication of the activity in the primary and secondary sectors of the economy.



“We expect the rand to trade sideways today and drift around the 14.80 level, but “risk-on” is still evident in the market thus we have a slight bias toward the rand drifting stronger,” Andre Botha, Senior Dealer at TreasuryONE said in a note.



In equities, the broader All-Share index inched up 0.04% to 55,615 points, while in fixed income the yield on the benchmark government bond due in 2026 stood at 8.15%.



Reporting by Nqobile Dludla, editing by Ed Osmond

South Africa’s rand strengthens, reignited by upbeat remarks from U.S. Federal reserve chairman

(Reuters) &#8211; South Africa’s rand was flat early on Monday, holding on to its brief recovery from last week as traders and investors continued to weigh heightened global growth risks against local uncertainty.



At 0740 GMT the rand was 0.1% weaker at 15.3050 per dollar versus a close of 15.2900 on Friday in New York, treading water as risk aversion linked to fears of slowing global growth and a crisis in Argentina lured investors to safe-haven assets.



The rand has fallen more than 6% since the beginning of August, pressured by the rising likelihood of a credit ratings downgrade by Moody’s linked to a massive, additional bailout for state power firm Eskom and signs of slower global growth.



The inversion of the U.S. Treasury bond yield curve &#8211; widely viewed as a sign of looming global recession &#8211; for the first time since 2007, also put pressure on the rand last week, but by Thursday some short-covering had seen it pullback from 11-month lows.



Traders said the rand is likely to remain in a narrow range ahead of Wednesday’s release of local consumer price inflation for July, with the rand’s attraction as a carry yield target the key focus.



Bonds were a touch weaker, with the yield on the benchmark paper due in 2026 adding 0.5 basis points to 8.39%.



Reporting by Mfuneko Toyana; Editing by Toby Chopra

South Africa’s rand flat as investors weigh heightened local, global risks, what you need to know

JOHANNESBURG (Reuters) &#8211; South Africa’s rand firmed against the dollar early on Monday as ratings downgrade fears eased after Moody’s said late on Friday it would not publish a review of the sovereign debt rating as indicatively scheduled.



The currency was further supported by a broader boost to investors’ risk appetite following positive Chinese factory gauges and signs of progress in Sino-U.S. trade talks.



At 0615 GMT, the rand traded at 14.3275 per dollar, 1.26 percent firmer than its New York close on Friday.



“The rand is demonstrating some of the market’s relief following no action by Moody’s last week, with it clawing back some ground during the overnight trade on Sunday,” said Bianca Botes, a corporate treasury manager at Peregrine Treasury Solutions.



South African markets on Friday were on edge over the impending review, with some economists concerned that a power crisis will cost the country its last investment-grade rating and lead to the outflow of billions of dollars.



Moody’s rates South Africa’s foreign and local currency debt on their lowest level of investment grade at ‘Baa3’, with a stable outlook.



In fixed income, the yield on the benchmark instrument due in 2026 dipped 6 basis points to 8.55 percent in early trade.



Reporting by Olivia Kumwenda-Mtambo, editing by Louise Heavens

South Africa’s rand firms as Moody’s delays credit rating review, what you need to know…

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With the Rand falling to R14.36 at the start of Minister Tito Mboweni’s Budget Speech and then moving back into positive territory, Rashaad Tayob, Fund Manager at Abax Investments, joined Godfrey Mutizwa to talk about the reaction of the bond and currency markets to the poor headline numbers of the Budget.

Markets react to fimin Mboweni’s #2019budgetspeech

JOHANNESBURG (Reuters) &#8211; South Africa’s rand gained early on Monday in low-volume trade ahead of a shortened Christmas holiday week, as political instability in the United States curbed the dollar’s recent surge.



Stocks ended higher in trade led by resource firms.



At 1200 GMT the rand was 0.6 percent firmer at 14.5450 per dollar, compared to a close of 14.6300 on Friday in New York.



The dollar index was down 0.19 percent.



The rand, along with other emerging currencies, was hit by a wave of selling going before the weekend, with investors squaring positions and looking to offload risk holdings.



But by Monday risk demand was revived by developments in Washington, with investors fretting over a government shutdown that could continue into January and a report that President Donald Trump has discussed the possibility of firing the head of the central bank.



“A potential U.S. government shutdown, President Trump threatening to fire the Chairman of the Federal Reserve and U.S. politics in general are adding some pressure to the dollar,” said Bianca Botes of Peregrine Treasury Solutions.



Bonds closed flat, with the yield on the benchmark 2026 paper steady at 9 percent.



On the bourse, the Top-40 index rose 1.43 percent to 46,203 points, while the broader all-share was up 1.27 percent at 52,081.



AngloGold Ashanti led the blue-chip index, up 4.4 percent at 184.40 rand.



Bourse heavyweight Naspers rose 3.9 percent on the day to 2,956.30 rand.



Reporting by Mfuneko Toyana; Editing by Subhranshu Sahu

South Africa’s rand gains as U.S. political instability weighs on dollar

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On this day three years ago, the South African currency and bond market saw a huge slump against the dollar on the back of the Finance Minister reshuffle. Joining CNBC Africa to unpack the state of recovery since then is Rashaad Tayob, Portfolio Manager at ABAX Investments.

The recovery currency and bond yields since #Nene gate

JOHANNESBURG (Reuters) &#8211; South Africa’s rand weakened in early trade on Tuesday, in line with falls in stocks amid subdued investor appetite for riskier assets ahead of U.S. midterm elections later in the day.
At 0650 GMT, the rand traded at 14.1175 per dollar, 0.11 percent weaker, having closed in New York at 14.1625.
The currency is expected to trade in a range of 14.1000 to 14.4000 to the dollar on Tuesday, NKC African Economics said in a note.
The rand remained under pressure as markets favoured caution ahead of U.S. midterm Congressional elections, as policy decisions that could sway the economy, corporate decision-making and consumer spending hinge on the results.
Emerging market assets will likely respond inversely to movements in the U.S. dollar after the elections.
Government bonds were firmer early on Tuesday, with the yield on the benchmark instrument due in 2026 down 4 basis points at 9.110 percent.
Stocks were set to open lower at 0700 GMT, with the JSE securities exchange’s Top-40 futures index down 0.37 percent.
Reporting by Nomvelo Chalumbira; editing by Richard Pullin

Why U.S midterms are putting pressure on South African rand ahead of elections

JOHANNESBURG (Reuters) &#8211; The South African rand extended its gains against the dollar in early trade on Friday and government bonds firmed as investors moved back into riskier assets, ahead of the closely watched U.S. jobs report.
At 0630 GMT, the rand traded at 14.3050 per dollar, 0.66 percent stronger than its close on Thursday, when it firmed more than 2 percent.
“The dollar has endured a significant correction over the course of the most recent sessions. The rand, after having traded to a high of 14.8525 on Wednesday, is trading sub-14.40 this morning. This is significant, as the 14.50 technical level has held firm so far,” Nedbank analysts said in a note.
“Key now would be price action after the U.S. data release this afternoon,” the note added.
Investors are waiting for U.S. employment data on Friday which could reinforce the view that the U.S. economy is outperforming rivals, driving investors back to the dollar.
The yield on the benchmark government bond due in 2026 dropped 11.5 basis points to 9.17 percent.
Reporting by Olivia Kumwenda-Mtambo; Editing by Sunil Nair

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