The rand weakened further late on Friday after ratings agency Fitch dropped the outlook on SA’s sovereign debt to negative from stable.
The rally in the rand came in the wake of expectations that the US Federal Reserve will cut interest rates, and saw the local currency trade below R14/$ for almost two weeks. “Fiscal metrics have deteriorated significantly due to under-performance of revenue, which is expected to worsen in the current fiscal year as growth has turned out to be weaker than expected. Low-trend GDP growth means that economic recovery is not expected to drive a major fiscal improvement in later years, while we also forecast expenditure to increase.”
The US economy grew 2.1% year-on-year in the second quarter from 3.1% previously. Despite the fall, the growth surpassed the 1.8% forecast by analysts in a Bloomberg poll. The latest quarterly GDP figures are considered as crucial data ahead of the Fed’s meeting at the end of July as markets have fully priced in a rate cut. Market expectations of a 25-basis-point cut were at 79.6% on Friday according to CME Groups’s Fed watchlist.
Absa was down 1.97% to R163.29, Nedbank 1.09% to R245.79, Firstrand 1.07% to R62.24, and Standard Bank 1.06% to R182.29. Agarwal said on Thursday that he is selling his stake in the diversified mining company.
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