ZAR: Rand Depreciates, S&P Downgrades Petra Diamonds

Spot USD/ZAR last deals at 18.4299, around 1,250 pips higher on the session, with the move facilitated by an uptick in the BBDXY Index (+0.2%). A clearance of the 18.5 level would allow bulls to target Aug 5 high of 18.6850. Meanwhile, bears look for a pullback towards Dec 12 low of 17.6191.

• S&P downgraded Petra Diamonds' rating to B- from B after hours Friday, leaving the outlook at negative. This was consistent with the expectation of our EM credit team flagged in their morning note. Following the rating downgrade, they remain sceptical of the S&P's base case scenario and see the risks as skewed to the downside. The outlook for the rand will play into the condition of the miner, as further depreciation would bode well for its profitability and debt servicing, while a recovery would add to existing pressures.
• Political uncertainty may have weighed on the rand this morning amid thinner liquidity, with Democratic Alliance (DA) Federal Chair Helen Zille noting that the party would insist on the correct implementation of the BELA Act, even after the contentious bill was signed into law on Friday.
• SAGB yields are lower across the curve, with South Africa's 10-year breakeven inflation rate last seen at 5.46%.
• The composite BBG Commodity Index sits 0.5% higher, while the precious metals subindex is just 0.1% better off.