Rand Recoups Losses Seen After Fitch & Moody's Cut South Africa Further Into Junk

ZAR started the week lagging its peers from the EMFX space, following Friday's rating action, but has recouped the bulk of early losses. Fitch downgraded South Africa's sovereign rating to BB- from BB (outlook negative) and Moody's cut the nation's score to Ba2 (outlook negative), while S&P affirmed South Africa at BB- (outlook stable). Over the weekend, South Africa's FinMin Mboweni commented that the double cut from Fitch & Moody's "is a painful one" and will constrain the government's fiscal framework by immediately raising borrowing costs. Mboweni noted that the gov't will have to fast-track growth-enhancing reforms to evade further rating downgrades.

• USD/ZAR kicked off on a firmer footing, before dipping on the back of broader dollar sales. The rate last sits at zAR15,3863, ~120 pips worse off on the day. A break below ZAR15.2865, which limited losses on Friday, would open up Nov 9 low of ZAR15.2104. Bulls look for a jump above Nov 19 high of ZAR15.5828 before targeting Nov 12 high of ZAR15.7347.
• South African calendar this week features the SARB's Financial Stability Review (Tuesday), CPI (Wednesday) & PPI (Thursday).