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South Africa’s rand bonds rally

By on June 8, 2016

South Africa’s rand rose its firmest in five weeks on Wednesday and government bonds also gained after ratings agency Fitch affirmed the country’s investment grade credit status.

By 1500 GMT the rand had gained 1.3 percent to 14.7095 per dollar, its firmest since May 4. The rand has gained 5.5 percent since Friday’s decision by S&P’s to maintain South Africa’s investment grade BBB- rating.

Fitch also maintained South Africa’s stable outlook, but warned that political tensions could still derail efforts to boost growth.

“The downgrade risk into junk has certainly not gone away and investors will still be cautious about getting into South African assets too quickly,” said BNP Paribas Cadiz Securities economist Jeffrey Schultz.

Official data showing the economy had contracted more than expected in the first quarter of the year had earlier weakened the rand, before it was buoyed by Fitch’s decision.

Trade volumes were lower than average, with 242 million shares changing hands compared to last year’s daily average of 280 million shares.

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