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Africa, Forex

South African rand lifted by vaccine hopes; shrugs off downgrades

(Updates rand, bonds; adds stocks)

JOHANNESBURG, Nov 23 (Reuters) – South Africa’s rand gained on Monday, lifted by global optimism over coronavirus vaccines and shrugging off ratings downgrades that are likely to push up government borrowing costs.

At 1430 GMT, the rand traded at 15.3500 versus the U.S. dollar, up 0.52% from its previous close.

The upbeat global market mood comes after a top official of the U.S. government’s vaccine development effort said on Sunday that the first vaccines could be given to U.S. healthcare workers and others recommended by mid-December.

That outweighed the domestic impact of downgrades by Fitch and Moody’s deeper into junk territory on Friday that the finance minister called painful.

S&P Global affirmed its rating on Friday.

“Progress on various vaccine developments to protect against COVID-19 are fuelling investor risk-taking, with positioning increasing in perceived higher return assets,” Investec Chief Economist Annabel Bishop said in a note.

“While the rand seemingly shrugged off the rating downgrades … market sentiment is highly fickle, and can easily collapse, returning the rand to weaker levels.”

South Africa’s public finances were in bad shape before the COVID-19 pandemic and have deteriorated since. This year’s budget deficit is expected to reach more than 15% of gross domestic product.

Stocks rose, also spurred by vaccine hopes and a strong half-year performance by index heavyweight Naspers Ltd .

The benchmark all-share index was up 1.02% to 57,193 points and the blue-chip top 40 companies index was up by 1.19% to 52,534 points.

Media and internet giant Naspers, which has close to 30% weight on the two indices, was up 2.4% after e-commerce revenues rose 37% for the year ended Sept. 30.

Government bonds weakened, as the yield on the 2030 bond rose 7.5 basis points to 8.89%. (Reporting by Alexander Winning, Olivia Kummwenda-Mtambo and Promit Mukherjee; editing by Larry King)


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