The rand extended gains from the previous session on Monday, while the JSE strengthened amid mixed global markets as investors awaited key developments this week.
After trading near its weakest level in three months due to concerns over president-elect Donald Trump’s policies, the local currency regained its footing. It reached an intraday high of R18.0074/$ as investors welcomed the improvement in SA’s credit rating outlook.
This week, attention will be on the Reserve Bank as its monetary policy committee (MPC) prepares to announce its interest rate decision on Thursday.
Market expectations suggest a 25 basis points (bps) cut to 7.75%. This decision is expected to build on the MPC’s September meeting, at which they cut rates by 25 bps.
“The expected 25bp rate cut is supported by a moderation in inflation,” said TreasuryOne currency strategist Andre Cilliers. However, Cilliers notes that the Bank is likely to maintain a cautious approach to ensure currency stability and control inflation expectations amid recent rand volatility.
Meanwhile, S&P Global raised SA’s credit rating outlook from stable to positive, citing the government of national unity’s reform agenda. This upgrade could lead to a ratings upgrade if economic growth and public finances improve faster than expected.
According to S&P, the positive outlook reflects potential for stronger growth and stabilised government debt if reforms accelerate.
“S&P’s decision is a significant vote of confidence in the GNU’s reformist agenda, driven by anticipated political stability and reforms aimed at boosting GDP growth, private investment, and narrowing fiscal deficits,” said Cilliers.
“This unexpected upgrade has positively influenced investor sentiment, contributing to the currency’s recovery.
“The credit outlook boost may incentivise continued reforms and efforts by the government to solidify gains in governance and infrastructure investments,” Cilliers added.
At 5.55pm, the rand had firmed 0.97% to R18.0141/$, 0.68% to R19.0457/€ and 0.69% to R22.7669/£. The euro was 0.33% firmer at $1.0574.
Telkom was the second-best performer on the day, with the company’s share price up 4.65% to R30.18 after it reported an almost 10% jump in profit at the halfway stage. The company said its cost optimisation initiatives had started to yield results.
The JSE all share had gained 0.66% to 84,425 points, with major indices mixed, while the top 40 added 0.6%.
At 6.05pm the Dow Jones industrial average was little changed at 43,450 points, while markets in Europe were mixed.
In the commodities markets, gold gained 2% to $2,614.1/oz and platinum 3.47% to $969.99/oz. Brent crude rose 3.18% to $73.12 a barrel.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.