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Rand steady as US-China trade uncertainty lingers

Markets showed little reaction to President Xi Jinping’s reiteration on Friday that China wants to work out an initial trade agreement with the United States and has been trying to avoid a trade war, but it is not afraid to retaliate when necessary.

Picture: Christa Eybers/EWN

JOHANNESBURG - The rand steadied against the dollar on Friday, as investors in currency markets globally sought concrete evidence of headway in the Sino-US trade negotiations.

At 0635 GMT, the rand traded at R14.7100 per dollar, not far from its close of R14.6870 on Thursday.

Markets showed little reaction to President Xi Jinping’s reiteration on Friday that China wants to work out an initial trade agreement with the United States and has been trying to avoid a trade war, but it is not afraid to retaliate when necessary.

Local focus is on S&P Global expected review of South Africa’s sovereign rating, which has been on non-investment grade since 2017.

“The significant fiscal slippage evident in the Medium-Term Budget Policy Statement delivered on 30 October, without a tangible plan to stabilise the deteriorating fiscal scenario, could trigger a change in the outlook of S&P’s ratings,” analysts at NKC African Economics said in a note.

“We expect that S&P will likely change the outlook to South Africa’s ratings from “stable” to “negative” this evening, following similar movements by both Fitch Ratings and Moody’s.”

The Treasury said in October that South Africa’s budget deficit was projected to rise to a nearly two-decade high and its gross debt was set to soar as a weak economy leads to revenue shortfalls while bailouts for state-owned companies strain public finances.

In fixed income, the yield on the benchmark government bond was down 0.5 basis points to 8.325% in early trade.

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