The South African Rand slipped today as Moody’s Investor Service set the credit rating of South Africa to negative, reducing appeal of the nation’s currency.
Moody’s reduced the outlook for the rating of South Africa’s sovereign debt to negative from stable today. The agency listed the reasons for such decision:
1. The growing risk that the political commitment to low budget deficits and the ability to keep within current debt targets could be undermined by popular pressures and rising internal strains within the African National Congress (ANC) party, and between the ANC and its partners in the Tripartite Alliance (the Congress of South Africa Trade Unions (Cosatu) and the Communist Party).
2. Expectations that growth will be somewhat slower than previously expected and limited to roughly 3%-3.5% over the medium term, which is insufficient to prevent already high unemployment rates from increasing further, thereby exacerbating social tensions.
3. The continued negative impact on private investment deriving from calls for interventionist actions aimed at “quick fixes” for black economic opportunities.
A cut of an outlook often foreshadows a downgrade of an actual rating.
USD/ZAR jumped from 7.8040 to 7.9820 today as of 13:34 GMT.
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