The rand firmed against the US dollar on Monday, staging a technical rebound after a selloff in the previous session due to thin liquidity, while stocks closed lower.
At 1510 GMT the rand was 0.73% firmer at R18.67 per dollar, rebounding after falling more than 1.5% on Friday when South African financial markets were close due to a bank holiday.
“The currency moved quite dramatically on Friday when we were out of the market … so a little bit of a pull back,” said Andre Botha, senior dealer at TreasuryONE.
“Fundamentally, nothing has changed. Markets are still under pressure,” he said, adding that the rand, along with other emerging market currencies, would be at the mercy of global risk sentiment again this week.
A series of dismal manufacturing activity numbers and rising tensions between the United States and China dented risk sentiment on Monday, hitting emerging markets.
In South Africa, the seasonally adjusted Absa Purchasing Managers’ Index fell in April, with business activity contracting to its lowest ever, as the coronavirus lockdown, now in its sixth week, paralysed manufacturing.
Separately, a senior National Treasury official said South Africa’s economy could contract by as much 12% and unemployment balloon to more than third of the workforce due to the impact of the coronavirus.
On the bourse, stocks fell in line with global stock markets, on concerns US-Chinese bickering over the origin of the coronavirus outbreak will ignite a new trade war.
The Johannesburg Stock Exchange’s top 40 index closed down 2.36% at 45,254 points and the all share index fell 2.28% to close at 49,187 points.
The biggest drag on the markets was the country’s banks with the banking index down 5.88% to 4,988 points. Gold, once again, was a safe haven for investors which pulled JSE’s gold index up 4.26%.
Bonds firmed, with the yield on the 10-year bond falling 8.5 basis points at 10.185%.