The rand weakened early on Friday as global sentiment over chances of a quick coronavirus recovery soured, with infections continuing to surge amid downbeat economic data.
At 0630 GMT the rand was 0.7% weaker at 16.96 per dollar, giving back almost all of the previous session’s gains that had lifted it to a one-month high of 16.7975.
The currency had shrugged off dismal manufacturing data showing output fell 49.4% year on year in April, its worst in 12 years, as investors looked to emerging market currencies and commodities for the high yields largely absent in developed market currencies.
But the positive mood faded overnight as Covid-19 infections kept climbing around the world and economic data disappointed, prompting more volatile trade as investors lost their appetite for risk.
China has reported record daily infection numbers on three of the past six days, while the United States saw more than 60 000 new Covid-19 cases, the largest single-day tally by any country so far.
“Given all the uncertainty surrounding the coronavirus pandemic and global economic recovery prospects, market sentiment continues to switch between risk-on and risk-off in a matter of seconds,” said market economists at ETM Analytics.
“If the market really bought into the economic growth optimism and recovery narrative, it wouldn’t be hedging its bets with gold purchases. Markets may well be positioning for additional monetary and fiscal stimulus measures in the months ahead.”
Bonds also trade weaker, with yields inching higher at the shorter end of the curve. The yield on the benchmark 2030 government issue added 2 basis points to 9.67%.