Rand softens as dollar rises on US housing data

Johannesburg - South Africa's rand weakened on Tuesday as the dollar was buoyed by strong US housing data that revived bets of a rate hike in the world's strongest economy by year-end.

At 17:02 GMT the rand had eased 0.26% to R11.9190 against the dollar, having ambled in the R11.80/$ region for most of the day before sliding lower as the greenback gained on the positive housing figures.

US housing starts jumped to their highest level in nearly 7-1/2 years, contrasting recent poor data and easing doubts about the resilience of the nation's economic recovery.

"We were trading around 11.80 for most of the morning session until the US housing data, which was much stronger than expected and drove the dollar stronger," said Ricardo da Camara, an economist with ETM Analytics.

The index measuring the dollar against a basket of major currencies showed the greenback 1.2% firmer.

Earlier, ratings agency Moody's said the chances of a change to South Africa's credit rating were slim.

Moody's downgraded South Africa to Baa2 in November, one notch above junk, while Fitch has an equivalent rating of BBB but with a negative outlook.

"The possibility of a downgrade lies with the Fitch review," da Camara said. "That could trigger a selloff on the rand and on bonds."

Bonds were mostly firmer, with the benchmark instrument due in 2026 shedding half basis a point to 8.045%.