RAND WEAKER AS GLOBAL ECONOMIC WORRIES WEIGH

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Moves in risk currencies globally, including the rand, have been sentiment-driven in recent sessions, with investors mostly staying on the sidelines as they weigh the prospects of a quick economic recovery.

JOHANNESBURG – The rand weakened on Thursday as demand for emerging currencies continued to ebb due to growing concerns over the impact of the coronavirus on the global economy.

The currency also lost strength after President Cyril Ramaphosa hinted on Wednesday evening that metropolitan areas might remain on an “alert level 4” lockdown, and over renewed worries about Sino-US trade relations.

The stock market dropped on Thursday on continued worries over a resurgence in coronavirus cases in some countries and US-China trade relations, making Tuesday’s rise an aberration.

At 1620 GMT, the rand was 0.38% weaker at R18.5700 per dollar from an opening level of R18.4980, extending losses from the previous session, which was triggered by a grim economic outlook given by the US central bank.

Moves in risk currencies globally, including the rand, have been sentiment-driven in recent sessions, with investors mostly staying on the sidelines as they weigh the prospects of a quick economic recovery.

US Federal Reserve chairman Jerome Powell on Wednesday gave a sobering assessment of the US economic outlook in a closely watched speech that quickened a move to safe-haven assets.

The grim outlook highlights South Africa’s economic fragility, with its dependence on trade with and investments from the United States, China and the European Union.

President Ramaphosa’s announcement late on Wednesday to cautiously ease lockdown restrictions failed to spur optimism as he said places with the most infections likely would remain into June on “alert level 4” of a five-level system.

The province of Gauteng, which houses the financial hub Johannesburg, and Western Cape, where the legislative capital of the country Cape Town is located, are the so-called epicentres of the coronavirus outbreak in South Africa.

“The longer the lockdown persists, the weaker household and corporate finances become on a macro level,” said Investec chief economist Annabel Bishop in a note. “Weaker demand is likely to persist even after a full reopening of the economy.”

The Johannesburg Stock Exchange’s (JSE) FTSE/JSE all share index extended losses on Thursday, closing down 2.07% at 49,113 points, while the top 40 companies index slipped 2.09% to settle at 45,445 points.

Commercial banks led losses, leading to a 5% drop in JSE’s banking index, and offset an almost 4% gain in the gold index. Gold prices were up 1.07% at 1630 GMT.

Bonds reflected the sour risk mood, with the yield on the government issue due in 2030 up 16 basis points to 9.590%.

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