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Rand slips as Covid-19 and economic clouds gather

As economy continues to tank.
Image: Bloomberg

South Africa’s rand weakened on Friday after two days of gains, weighed down by fears of a rebound in global Covid-19 infections and concerns about the local economy.

At 1500 GMT the rand was 0.34% weaker at 17.03 per dollar, rolling back gains from the previous session that saw the currency rally to a three-week best of 16.87.

The Johannesburg Stock Exchange (JSE) also slipped on Friday but ended the week 1.6% higher.

Losses in the day were also spurred by low liquidity as the US market was closed for a bank holiday.

The rand has struggled for clear momentum in recent weeks, failing to hold levels below the key 17 mark with investors unnerved by the mounting fiscal crisis and an accelerating rate of coronavirus infections.

South Africa reported its biggest daily jump in Covid-19 cases on Thursday, adding 8 728 confirmed infections and taking the total count to 168 061. Deaths rose by 95 to 2 844.

Data this week showed Africa’s most advanced economy had contracted in fourth of the last five quarters, the bleak data coming a week after the Treasury said public debt would breach 90% in the short term.

“Looking further out, there are signs that the rand could stage a recovery towards the end of the year,” market economists at ETM Analytics said in a note.

“There are, however, significant risks to this outlook, with South Africa still rapidly on its way towards a debt crisis, rendering the local unit extremely vulnerable to any external shocks or reversals of global stimulus programmes.”

In stocks, the benchmark FTSE/JSE All Share Index closed down 0.17% to 54 523 points and the Top 40 Companies Index fell 0.26% to 50 180 points.

Bonds also took a hit, with the yield on the benchmark 2030 government issue rising 15.5 basis points to 9.42%.

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