JOHANNESBURG: South Africa's rand fell as much as 2.4 percent against the dollar in generally risk averse trade on Monday, weighed down by worries that a credit rating downgrade could be looming.
Stocks ended the session higher, with Old Mutual among the top gainers after a broker upgraded its target price.
The rand stumbled to 15.5900 versus the greenback, its softest in more than a week according to Thomson Reuters data, and was down 2.3 percent at 15.5675 by 1610 GMT compared with Friday's close.
It was the second weakest performer in a basket of emerging market currencies tracked by Reuters, with only Ukraine's hryvnia being worse off.
The rand extended earlier losses after Finance Minister Pravin Gordhan said investors he had met during a roadshow abroad were concerned about risks to South Africa's fiscal outlook and slow economic growth.
Gordhan spoke two days before ratings agency Moody's visits South Africa to assess the economy and decide whether to cut its Baa2 rating. It would be hard for South Africa to work its way up the ratings latter again, should it be downgraded, he said.
"Some of the comments about the ratings agencies from Finance Minister Gordhan are not really helping," HSBC EMEA forex strategist Murat Toprak said.
"All the talk about a potential downgrade, or the uncertainty surrounding the credit rating of South Africa is explaining why we have this underperformance of the rand relative to other emerging market currencies.
Traders expected further direction from the central bank's interest rate decision on Thursday.
A Reuters poll of 30 economists expects the South African Reserve Bank (SARB) to leave its benchmark lending rate at 6.75 percent after hiking by 50 basis points in January, despite rapidly rising inflation.
On the bourse, Old Mutual, which said last week it will split into four main businesses to unlock value for investors, jumped 5.2 percent to 42.10 rand.
Brokers at Barclays raised the price target of the Anglo-South African financial conglomerate, citing the company's good operational momentum.
"Investors are taking positions in Old Mutual for the potential value unlocking that could come from the unbundling that is on the horizon," said Inkunzi Investments senior trader Petri Redelinghuys.
Overall, the blue-chip JSE Top-40 index added 1.74 percent to 46,555 and the broader All-share index gained 1.4 percent to 52,471.
Trading volumes were low, with more than 227 million shares changing hands compared with last year's daily average of 296 million shares.
South African government bonds weakened alongside the rand, with debt due in 2026 adding 3 basis point to 9.145 percent.
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