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Rand extends losses before Moody's review, stocks rise

The rand extended losses against the dollar on Thursday after Finance Minister Tito Mboweni gave a bleak budget speech a day earlier in which he slashed growth forecasts and predicted ballooning debt, raising fears of a ratings downgrade.

Picture: EWN

JOHANNESBURG - The rand extended losses against the dollar on Thursday after Finance Minister Tito Mboweni gave a bleak budget speech a day earlier in which he slashed growth forecasts and predicted ballooning debt, raising fears of a ratings downgrade.

Stocks rose, led by gains in mining shares.

At 1505 GMT, the rand was 0.74% weaker at R15.1120 per dollar.

Government bonds also weakened further, with the yield on the benchmark instrument up 6 basis points to 8.495%, as investors faced the prospect of South Africa’s losing its last investment-grade rating, from Moody’s.

“Trying to hang on to a long dollar position was close to impossible as everyone scrambled to the exit door,” said Standard Bank chief trader Warrick Butler in a note.

“I will bet my last dollar that Moody’s will now move the country to negative watch. Something that before yesterday’s MTBPS (budget) was only a 40% probability has now become an almost guaranteed outcome.”

Mboweni cut the forecast for 2019 economic growth to 0.5% from 1.5%, put debt at over 70% of gross domestic product in the next two years and the budget deficit at 5.9% - its highest since the 2009 global financial crisis.

On the bourse, the Top-40 index was up 1.09% while the broader all-share gained 1.25%.

Leading gains were gold miners after bullion rose as the dollar came under pressure when the US Federal Reserve cut interest rates, while uncertainty surrounding a US-China trade deal bolstered the metal’s appeal as a safe-haven investment.

The gold stocks index was up nearly 6%, as AngloGold Ashanti jumped 7.37% while Gold Fields was up 5.7%.

“A lot of it has got to do with (US) interest rates being cut last night,” said Andrew Padoa, a portfolio manager at Sasfin.