S&P ratings reassurance lends support to South Africa's rand

Photo illustration of South African bank notes displayed next to the American dollar notes in Johannesburg
South African bank notes featuring images of former South African President Nelson Mandela (R) are displayed next to the American dollar notes in this photo illustration in Johannesburg August 13 2014. REUTERS/Siphiwe Sibeko

JOHANNESBURG (Reuters) - The rand firmed against the dollar on Thursday as comments from ratings agency Standard & Poor's that it was not looking to downgrade South Africa's banks added to earlier gains in the euro to prop up the rand.

The rand traded at 10.6965 to the dollar at 1626 GMT, up 0.3 percent on its previous close in New York on Wednesday.

The rand initially perked up as the euro recovered from 11-month lows against the dollar after better-than-expected German private sector growth data.

Later S&P added to the positive sentiment, saying South Africa's banking sector was not at risk of systemic failure because of the fall of African Bank.

"Comments from ratings agency Standard & Poor's that say they have no plans to downgrade South African banks like Moody's did offer the rand an extra boost," Anisha Arora at 4 Cast said, adding that room to stretch towards the key 10.850 area may be capped.

"We look for range trading into the weekend as our colleagues note that the Fed's Jackson Hole Symposium is set to keep euro/dollar under quiet trade, with 10.63 and 10.59 offering support."

Government bonds firmed with the rand. The yield on the benchmark 2026 issue was down 3 basis points at 8.215 percent, while the 2015 issue dropped 2.5 basis points to 6.55 percent.