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The South African rand is enjoying a bounce after Standard & Poor’s soothed fears the country’s credit rating is on the brink of being downgraded to junk.
The dollar has dropped 1.3 per cent intraday against the rand since S&P said the budget unveiled by South Africa yesterday has “not immediately affected” its ratings.
The dollar was up 0.5 per cent against the South African currency, but is now down 0.4 per cent at 15.53 rand per dollar.
The budget presented yesterday by Pravin Gordhan, South Africa’s finance minister, had been eagerly anticipated as investors waited to see how he would respond to pressures buffeting the country’s finances. The commodities slump and China’s slowing economic growth have coincided with a sharp rise in unemployment in the country.
Yesterday the dollar jumped as much as 3.6 per cent against the rand, as the Treasury slashed its growth forecast for 2016 to 0.9 per cent from 1.7 per cent in October.
But today’s bounce suggests S&P has gone some way to allaying fears of an imminent downgrade.
Chart courtesy of Bloomberg