Rand firmer but vulnerable amid downgrade fears

Johannesburg - The rand firmed to a one-week high against the dollar early on Wednesday on improved risk appetite, but analysts said the unit looked vulnerable to the possibility of a credit ratings downgrade and a US Federal Reserve interest rate hike.

At 09:00, the rand traded at R15.5100/$ the dollar, 0.94% firmer from its New York close on Tuesday.

The currency was trading at its strongest levels since May 17, according to Thomson Reuters data.

"Locally the focus is currently firmly on the impending announcements from Standard & Poor's and Fitch and the possibility of a Fed hike," Nedbank Capital analysts Mohammed Nalla and Reezwana Sumad said in a note.

"Yesterday’s US new home sales have spurred hawkish sentiment even further and would suggest that the probability of a hike has increased significantly."

Investors are also cautions ahead of ratings agency S&P review due to be published on June 3, which could see the South Africa debt rating cut to junk.

Fitch was also expected to publish its review next month.

On the stock market, the Top 40 index was up 0.68%, while the broader All-share rose 0.56% in early trade.

In fixed income, the yield for the benchmark instrument due in 2026 was down 5.5 basis points to 9.395%.