JOHANNESBURG (Reuters) - South Africa’s rand traded slightly weaker early on Monday, still nursing substantial losses of the previous week as fears of credit downgrades to sub-investment intensified by ongoing political wrangles.
At 0640 GMT, the rand was 0.12 percent weaker at 14.4000 per dollar against Friday’s close of 14.3825 in New York.
The rand dived to a 12-month low on Friday on reports President Jacob Zuma government was considering a range of budget cuts that could include slashing social grants for the most vulnerable in order to pay for free tertiary education.
The presidency denied the reports, but the currency traded weaker on the rumour and is set to remain under pressure with demand for local bonds waning and bets of higher rates in the United States luring funds away form emerging markets.
S&P Global Ratings and Moody’s are scheduled to review South Africa’s credit rating on Nov. 24. S&P, along with Fitch, downgraded South Africa’s foreign-currency rating to speculative grade in April following surprise cabinet changes and a weak economic growth outlook.
“Locally the news headlines being dominated by the talk of the free tertiary education plan, and the ongoing talk of nuclear energy programmes both of which are unaffordable none of which are likely prove to be supportive of the local unit,” said chief analyst at Nedbank Reezwana Sumad in a note.
The yield on the benchmark government bond due in 2026 was up 4.5 basis points at 9.4 percent.
Stocks were set to open higher at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.22 percent.
Reporting by Mfuneko Toyana