With King Dollar riding roughshod over all other players in the currency market there hasn’t been much to bring a glimmer of hope for the Rand, but a surprise credit rating review from S&P on Friday night might just give us a little boost this morning.?
These are the mid rates at 5:50 today:
Brent Crude = $71.41 per barrel
- Last week’s theme was one of Dollar dominance and while Friday saw us trade sideways around R18.26 to the Dollar the damage done in previous sessions meant we suffered a significant weekly loss against the greenback.? But after closing last Friday at R18.21 we find ourselves at R18.12 early this morning, possibly thanks to the credit rating headlines which came after the market closed on Friday evening.?
- When it comes to global credit ratings South Africa has been on a downwards slide since 2012 with us falling into junk status in 2020, and then being cut deeper and deeper into junk territory since.? Our recent medium term budget speech had not been well received by Fitch, one of the big three rating agencies, and so it came as a surprise when S&P announced that they have upwardly revised our outlook on Friday night from “stable” to “positive”.? This is not an official upgrade but it indicates that their next move could well be an upgrade, and their positive language around SA’s prospects should be well received by the Rand if only for a brief moment before the Dollar takes centre stage again.
- The following is from Business Day:? S&P Global has given a surprise nod of approval to the government of national unity’s reform agenda, raising the outlook on SA’s rating from stable to positive in a move that could see it upgrade the rating if economic growth and the public finances improve faster than expected. Stanlib economist Kevin Lings said S&P’s decision, which analysts had not expected, was welcome and generous, given SA’s low growth rate and fiscal slippage seen in the medium-term budget. But the economy needed all the support it could get in trying to lift investor confidence and inspire increased fixed investment, he said.
- The Rand opens today on the front foot with an early move to R18.12 but it would appear that any further improvement would be Dollar dependant as the greenback is still basking in a post-US election afterglow.? The Dollar Index might have taken a breather on Friday as it hovered around the 106.70 level, but with questions still circling around how many rate cuts the FED will be able to deliver under the Trump administration’s policies it seems unlikely that the Dollar is going to give up ground any time soon.?
- The following is from Reuters and talks to significantly higher US Treasury yields, Trump’s policies and US economic strength as reasons why not to bet against the Dollar just yet:? Against a basket of currencies the Dollar Index held at 106.66, having touched a one-year top of 107.07 on Friday. The index climbed 1.6% over the week, marking six weeks of gains in the last seven. The rally has coincided with a savage swing in 10-year Treasury yields, which have climbed 70 basis points since the start of October, fuelling a 5.4% rise in the Dollar Index. "While a period of consolidation looks likely in the near term, we have revised up our forecasts for the Dollar and now project a further 5% appreciation by the end of 2025," said Jonas Goltermann, deputy chief markets economist at Capital Economics. "That is based primarily on a view that Trump will push ahead with the core tariff policies he proposed on the campaign trail and that the US economy will continue to outperform its major peers."
- No local market data today but we have a busy week ahead with our latest CPI and retail sales readings on Wednesday followed by the SARB’s last monetary policy announcement on Thursday where another interest rate cut is highly likely, but how big??
- Possible USD mid rate trading ranges in the Rand today are R18.00 and R18.30.
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