South Africa’s rand drifted weaker on Tuesday as ratings agency S&P Global said South Africa needed stronger growth to escape “junk” status and as traders expected the central bank to cut its main lending rate on Wednesday.
The rand has been in vogue since President Cyril Ramaphosa replaced scandal-plagued Jacob Zuma last month but some investors are concerned the currency’s rally is losing steam.
“We believe most of the good local news is priced in at these levels and the trend will be driven by global risk appetite and further evidence of domestic reforms that can lift potential growth,” RMB analysts said in a note.
At 1531 GMT, the rand traded at 11.6550 per dollar, 0.3 percent lower than its overnight close of 11.6200.
S&P ratings agency said South Africa was not anywhere near being upgraded, sapping momentum provided in the previous session by Moody’s raising its credit outlook.
Forwards markets were pricing in a 89 percent chance of a 25 basis point rate cut at the South African Reserve Bank’s monetary policy meeting on Wednesday.
Shares eased slightly with construction firm Murray & Roberts the big mover, falling as much as 6 percent after the management rejected the offer of a buyout from Germany’s ATON, already a majority shareholder.
Murray & Robert’s shares closed down 4.13 percent to 13.45 rand. The All-share index was down 0.2 percent to 56,050 points. The Top 40 index fell 0.3 percent to 49,417 points.
“Our shares are trading at big discounts and might become a target for foreign investors,” said Greg Davis, equities trader at Cratos Wealth.
“We are surprised that the market is not a lot stronger after the positive news from Moody’s and a good chance of a rate cut tomorrow.”
In fixed income, the yield for the benchmark government bond due in 2026 was down 2.5 basis points to 7.890 percent.