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Africa, Forex

South Africa’s rand retreats from post-budget rally, stocks rise

(Updates rand, adds bonds and stocks)

JOHANNESBURG, Feb 25 (Reuters) – South Africa’s rand fell on Thursday, giving up the previous session’s gains when Finance Minister Tito Mboweni’s budget speech reassured some investors the country could avoid a full-scale fiscal crisis.

At 1735 GMT, the rand was 2.38% weaker at 14.8450 per dollar, far off the 13-month high of 14.3950 it hit on Wednesday.

Government bonds also weakened and the yield on the instrument due in 2030 jumped 18 basis points to 9.0%.

Mboweni announced up to 19.3 billion rand ($1.31 billion) of spending on coronavirus vaccines and forecast a deficit of 14% of gross domestic product this fiscal year, while repeating promises to cut expenditure.

The Treasury also announced a steep reduction in debt issuance in the local market after leaning heavily on investors for short-term cash in 2020 to fund the revenue shortfall triggered by COVID-19.

But not all investors were enthusiastic about the economic recovery path painted by the budget.

Fitch, one of three major credit ratings firms to rank South Africa in subinvestment, said the country still faced “severe challenges” to implementing fiscal consolidation.

“The more favourable projections mean that further rating downgrades might be off the agenda for now. It is impossible to overlook though that public finances remain extremely difficult not least due to the weak growth prospects,” said Commerzbank’s FX and EM analyst Elisabeth Andreae.

Stocks closed higher, led by miners.

Johannesburg-listed shares of Anglo American rose 7.3% after the company beat forecasts with a small fall in 2020 earnings and boosted its dividend.

Shares in Impala Platinum (Implats) were up 7.16% after it said it was looking to boost its output after posting a four-fold jump in half-year profits and raising its interim dividend.

The Top-40 index rose 2.17% to 62,063 and the broader all-share closed 1.94% higher at 67,483. ($1 = 14.7889 rand) (Reporting by Mfuneko Toyana and Olivia Kumwenda-Mtambo; editing by Barbara Lewis)

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