April 6, 2020 / 7:45 AM / 4 months ago

South Africa's rand weakens after another Fitch downgrade

A picture illustration shows a South African two Rand coin April 4, 2017. REUTERS/Thomas White/Illustration

JOHANNESBURG (Reuters) - South Africa’s rand weakened early on Monday, sliding to a record low, after the ratings agency Fitch cut the country’s credit rating on Friday for the second time in a week, pushing it further into sub-investment territory.

At 0645 GMT, the rand was down 0.3% to 19.1100 per dollar, pulling back from 19.3590, its weakest ever.

Fitch lowered its foreign-currency rating to ‘BB’ from ‘BB+” and assigned a negative outlook, forecasting a 3.8% contraction to the economy in 2020 and a fiscal deficit of 11.5% of GDP.

The downgrade follows Moody’s decision in the last week of March to strip the country of its last investment-grade credit rating, a move which will see the country’s local-currency debt ejected from the benchmark World Government Bond Index.

South Africa’s economy went into the global novel coronavirus crisis already in it second recession in two years in the final quarter of 2019 and the 2020 outlook not much better.

South Africa reported 1,585 coronavirus cases as of late Saturday, with nine deaths, and is in its second week of a nationwide lockdown that has seen the economy grind to a halt and government explore emergency policy measures.

Bonds opened weaker, with the yield on the benchmark debt due in 20206 up 3 basis points to 11.465%.

In equities, retailer Woolworths said it expects profit for the 52 weeks to June 28 to fall more than 20% year-on-year due to a drop in sales owing to measures to prevent the spread of the coronavirus.

Reporting by Mfuneko Toyana, editing by Larry King

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