The rand has been the best performer this week amongst a basket of 24 emerging market currencies, having strengthened by 3.2%. The market response to the local currency credit rating downgrade by S&P to sub-investment grade last Friday (24th November) has been relatively contained, and the strength this week could be a response to the stay of execution from Moody’s. A simultaneous downgrade from Moody’s would have triggered exclusion of SA bonds from the World Government Bond Index and forced selling of local bonds have been estimated at up to R200bn. Over the course of the week the rand may have also responded to statements from the Presidency regarding intentions of some fiscal consolidation in the 2018 Budget.

Next week, domestic political events will remain in focus with the remaining ANC provincial general councils holding branch nominations into the weekend and next week, such as Gauteng and Limpopo. Based on the nominations from provinces received so far, Deputy President Cyril Ramaphosa is just in the lead. The rand may have derived support from this as well on perceptions that a Ramaphosa led ANC would align policy more to the National Development Plan and be more business friendly.

In the week ahead, the rand is expected to trade in a range of R13.20/USD – 14.20/USD, R15.80/EUR - R16.80/EUR and R18.00/GBP - R19.00/GBP.