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Rand pulls back as trade surplus fails to offset downgrade fears

Stocks set to open firmer, with the Top-40 index up 0.3%.
Picture: Shutterstock

JOHANNESBURG – South Africa’s rand inched lower early on Tuesday as a bigger than expected trade surplus for June and a dip by the dollar failed to offset the impact of a warning by Moody’s about political interference in the country’s economic policy.

By 0645 GMT the rand had retreated 0.15% to 13.2075 per dollar, compared to a close of 13.1875 overnight in New York.

The currency slipped to a two-week low in the previous session after the ratings agency said that, while a rate cut on July 20 by the central bank would support growth, there was growing political pressure on economic policy.

Read: Rate cut signals political pressure on Sarb – Moody’s

Moody’s rates South Africa’s debt at the lowest investment grade level with a negative outlook. It could move on the rating later this month. A downgrade would mean all three main agencies would rank South Africa at “junk”.

The trade surplus rose to R10.67 billion ($813 million) in June, against expectations for R8.4 billion. Local vehicle sales data is due on Tuesday.

Read: Trade surplus rises to R10.67bn in June

Bonds were weaker, with the yield on the benchmark paper due in 2026 rising 1.5 basis points to 8.635%.

Stocks were set to open firmer at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.3%. 

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