November 24, 2017 / 7:08 AM / in 25 days

South African rand slips before key ratings reviews

JOHANNESBURG (Reuters) - South Africa’s rand was slightly weaker early on Friday, before important reviews of the country’s credit ratings expected later in the day.

A street trader counts out change for a customer in Durban, September 8, 2015. REUTERS/Rogan Ward

At 0642 GMT, the rand traded at 13.9300 versus the dollar, 0.3 percent weaker than its New York close on Thursday.

S&P Global and Moody’s are scheduled to review South Africa’s ratings on Friday.

All eyes are on whether the two agencies downgrade the country’s local-currency debt to “junk” status. If both agencies downgrade South Africa one notch to junk, that could trigger up to $12 billion of forced selling of South African bonds, in turn pressuring the rand.

Fitch kept South Africa’s local and foreign currency credit ratings unchanged at BB+, one notch below investment grade, on Thursday.

Ratings agencies have cited policy uncertainty and a deteriorating fiscal position among concerns for the health of South African public finances.

Bond yields and default insurance costs suggest South Africa’s deeper descent into junk-credit territory and ejection from major global debt indexes seem to be accepted as a done deal.

Government bonds were a touch weaker early on Friday, with the yield on the benchmark instrument due in 2026 1 basis point higher at 9.355 percent.

Reporting by Alexander Winning; Editing by Biju Dwarakanath

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