South Africa’s currency firmed on Thursday, trading back on a one-week best as weak inflation numbers through the U . s . compounded a sharp Wall Street rout, re-igniting rand bulls in advance of Moody’s rating decision.
Stocks plunged to levels last noticed in July 2017 amid a world market sell-off but losses were soothed by market heavyweight Naspers.
At 1530 GMT the rand was 0.95% firmer at 14.6400 per dollar, having sprinted into a session-best 14.5225, its firmest since Oct.3, immediately after consumer price-growth data the united states underwhelmed.
The CPI miss reduced bets that US inflation is accelerating, pushing the greenback to some two-week low, allowing some emerging market currencies a breather.
The rand is however seen struggling to maintaining its gains, having neglected to hold below technical resistance at 14.50 twice immediately and the Moody’s rating review due on Friday posing significant event risk.
IHS Markit senior analyst Langelihle Malimela said Moody’s may likely hold off as soon as the medium term budget on Oct. 26, for being delivered by newly-hired Finance Minister Tito Mboweni, just before decisive action.
“Timing for the budget, its content, and certain funding arrangements for infrastructure development will be key indicators for policy direction, fiscal stability, and currency movements in the coming months,” Malimela said.
Bonds were weaker as U.S treasuries continued to attract the bulk of fixed income action. The yield over the benchmark paper due in 2026 rose 3 basis points to 9.27%.
The All-Share index fell 1.11% to 52,229 points as the blue chip Top-40 index was 1.23% weaker at 46,050 points.
“Global markets are actually hit by investors’ risk-off sentiment. Naspers would’ve faired worse considering Tencent was down around 7%,” said Kyle Burgess, portfolio manager at Nedbank Private Wealth.
Naspers, which owns a 31.2% stake in Hong Kong tech firm Tencent, closed 0.9% higher to 2,609 rand despite its Chinese parent diving 6.8% as Asian shares plunged to 19-month lows.
“Another factor weighing on global markets may be the IMF cutting its global economic outlook the very first time in many more than two years,” Vestact analysts said in the note.
The International Monetary Fund lowered its global growth forecasts for 2018 and 2019, saying the U.S-China trade war was going for a toll and emerging markets were experiencing tighter liquidity and capital outflows.
Bullion stocks leapt 10.24% as gold prices were buoyed through the market selloff and softer dollar.?