Rand pulls back as trade surplus fails to offset downgrade fears

JOHANNESBURG – South Africa’s rand inched lower early on Tuesday as a bigger than expected trade surplus for June and a dip by the dollar failed to offset the impact of a warning by Moody’s about political interference in the country’s economic policy.

*By 0645 GMT the rand had retreated 0.15 percent to 13.2075 per dollar, compared to a close of 13.1875 overnight in New York.

* The currency slipped to a two-week low in the previous session after the ratings agency said that, while a rate cut on July 20 by the central bank would support growth, there was growing political pressure on economic policy.

* Moody’s rates South Africa’s debt at the lowest investment grade level with a negative outlook. It could move on the rating later this month. A downgrade would mean all three main agencies would rank South Africa at “junk”.

* The trade surplus rose to 10.67 billion rand ($813 million) in June, against expectations for 8.4 billion rand. Local vehicle sales is data due on Tuesday.

* Bonds were weaker, with the yield on the benchmark paper due in 2026 rising 1.5 basis points to 8.635 percent.

* Stocks were set to open firmer at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.3 percent.

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