August 1, 2017 / 4:00 PM / 7 months ago

UPDATE 1-South Africa's rand slips on downgrade fears, stocks lifted by rand hedges

* Rand weak on Moody’s warning

* Foreign currency earners up (Adds latest prices, analyst quotes)

JOHANNESBURG, Aug 1 (Reuters) - South Africa’s rand extended its losses against the dollar on Tuesday after a warning by Moody’s about political interference in the country’s economic policy reignited fears about downgrades of credit ratings.

Stocks posted modest gains as rand-hedged companies lifted the bourse.

At 1505 GMT, the rand traded at 13.2575 per dollar, 0.53 percent weaker than its New York close on Monday. The unit fell to 13.3100 earlier in the session, a near three-week low.

“The renewed weakness in the rand is a result of elevated credit rating fears. A recent report from Moody’s flagged ongoing structural growth concerns and South African Reserve Bank independence worries,” Rand Merchant Bank analyst Ilke van Zyl said.

Moody’s said on Monday that, while a rate cut on July 20 by the central bank would support growth, there was growing political pressure on economic policy.

Central Bank governor Lesetja Kganyago said after the rate cut that the central bank remained independent and had not come under any pressure to reduce rates.

Public Protector Busisiwe Mkhwebane, whose job is to ensure proper conduct in public office, sparked a political row when she proposed in June that the central bank’s monetary policy mandate be changed to focus on economic growth.

Central bank governor Kganyago filed a court challenge to quash the recommendation, describing the proposal as reckless. The hearing for the case started in Johannesburg on Tuesday, and a ruling is expected by August 18.

On the stock market, the JSE’s All-share index ended 0.33 percent higher at 55,390 points while the benchmark Top-40 index was up 0.34 percent to 49,038 points.

Rand hedges, shares of companies with operations abroad that make the bulk of their revenue outside South Africa, and tend to benefit from a weaker rand, lifted the bourse.

Luxury goods maker Richemont, which has risen more than 23 percent this year, was up 1.07 percent to 113.35 rand.

“A lot of oomph is coming out the rand hedges due to the weaker rand,” Paul Chakaduka, a trader at Global Trader said.

British American Tobacco gained 2.03 percent to 842.01 rand while Britain-based property company Capital & Counties was up 1.68 percent to 50.37 rand.

In fixed income, the yield for the benchmark government bond due in 2026 was flat at 8.62 percent. (Reporting by Olivia Kumwenda-Mtambo and Olwethu Boso; editing by Alister Doyle)

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