The rand edged firmer on Tuesday, clinging on to recent gains as investors continued to see value in holding the high-yielding currency despite signs of a creaking economy and climbing COVID-19 cases.
The approval by 86% of creditors of a restructuring plan for loss-making state airline SAA after months of wrangling between government and labour union barely moved the currency, reflecting the continued focus on offshore events.
At 1500 GMT, the rand was 0.2% firmer at R16.81 per dollar, backtracking slightly from Monday’s best of R16.74 as risk aversion filtered into overnight trading in Asia amid tensions between the United States and China resurfaced.
The United States on Monday rejected China’s disputed claims to offshore resources in most of the South China Sea, a move that Beijing criticised as inciting tensions in the region and which highlighted an increasingly testy relationship.
Locally, total mining output in May fell 29.8% year-on-year compared to a April contraction of 50.3% in April, while gold production slumped 20.3%, Statistics South Africa said.
“The slight improvement is welcome as it signals that local production is starting to recover post the hard lockdown,” analysts at Nedbank said in a note.
“The speed of any recovery however, will depend on how quickly the country moves through the various stages of lockdown towards some semblance of normal operations. Which, depending on the source, could be as soon as September this year or sometime in 2021.”
South Africa has the highest number of confirmed coronavirus cases in Africa, with more than 270,000 infections, and over 4,000 deaths, and is now recording the fourth-largest daily increase in new cases worldwide at more than 12,000 per day.
The stock market fell on Tuesday with the benchmark FTSE/JSE All Share Index down 1.19% to end at 55,531 points while the FTSE/JSE Top 40 Companies Index closed down 1.23% to 51,235 points.
Bonds were a touch weaker, with the yield on the benchmark 2030 government issue up 0.5 basis points to 9.455%.