Rand firmer than expected after credit rating downgrade

The rand was firmer against the dollar on Tuesday afternoon despite having weakened on news that SA’s credit rating had been downgraded to sub-investment grade by S&P Global Ratings.

The agency said the downgrade came as a result of concern that the country’s policy continuity had been put at risk after President Jacon Zuma fired Pravin Gordhan as the finance minister and replaced him with Malusi Gigaba.

Gigaba was adamant that despite there having been changes to the financial executive of Cabinet‚ government’s policy remained the same and reassured business leaders‚ organised labour and ratings agencies that Treasuries were worth being optimistic about.

The downgrade has increased calls for the president to step down‚ with ANC ally‚ the Congress of South African Trade Unions‚ putting its weight behind the accusation that Zuma lacks the necessary leadership skills. There is a social media movement to have a public protest in support of this on Friday.

Rand Merchant Bank analyst John Cairns said the market reaction to the downgrade was slightly gentler than that seen in other countries that lost investment-grade status. He said this could imply further market losses‚ but experiences have varied sharply.

At 3.29pm‚ the rand was at R13.6683 to the dollar from a previous close of R13.7425; it weakened to R13.9472 in intra-day trade. It was at R14.5717 to the euro from R14.6657‚ and at R17.0369 to the pound from R17.1494. The euro was at $1.066 from $1.0672.​

 - TMG Digital/BusinessLIVE