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Poor rating causes the rand to slide

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South Africa’s recent rating downgrading to junk status has led to the local rand currency falling to its lowest level so far, Standard Bank chief economist Goolam Ballim noted on Monday, 30 March 2020.

Ballim, soon after the rating downgrading during the weekend, predicted the currency would reach the 18-rand mark to the US dollar.

This record low landmark for the currency came after markets opened Monday morning, the economist said.

The currency was trading at lows of 17.74 rands to the greenback last week on Monday, breaching a 17-rand mark the week before.

Moody’s downgrade of South Africa’s credit rating to junk status on Friday night means that South Africa’s borrowing costs will likely increase.

Moody’s was the last of the credit rating agencies that still had an investment grading of South Africa’s debt.

This new junk status means that South Africa will eventually have to exit from global bond indices, causing a greater outflow of foreign capital and a further weakening of the rand.

Last week economists had warned that the local currency would remain extremely weak in the coming days as the coronavirus continued to ravage global markets.

– APA

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