The rand traded at fresh lows in the morning session on Monday (23 March), as coronavirus continues its rapid spread in Europe and the US over the weekend.
Bloomberg reported that the greenback soared against emerging-market currencies including the rand as investors piled into haven assets on fears that the coronavirus will send economies into freefall.
“The dollar is rallying on haven demand — markets are digesting the implication of job losses, a prolonged economic downturn,” said Christopher Wong, senior foreign-exchange strategist at Malayan Banking Bhd. Currencies “prone to capital outflows and those that were people’s favorite carry trades” are vulnerable to fresh selling pressure.
Bianca Botes, treasury partner at Peregrine Treasury Solutions, noted that measures against the spread of Covid-19 coronavirus have intensified, which will have a knock-on effect on the global economy.
“Airlines continue to cancel flights and countries intensify lockdowns in an effort to halt the rapid spread of the Covid-19 virus. The virus now has a global death toll of more than 14,600 people, and the number of active cases has topped 224,000 worldwide,” Botes said.
“Meanwhile, the race for cash saw global markets come under pressure yet again in overnight trade, with the rand trading at fresh lows.”
“We will keep our eyes on policymakers, and wait for the address from president Ramaphosa on the coronavirus crisis,” Botes said. Ramaphosa is expected to offer some guidance on additional steps that may be taken to address the pandemic’s economic impact, as well as the possible tightening of restrictions as the number of confirmed cases in South Africa reaches 274.
Questions remain over how the coronavirus will impact the economy, which slipped into a technical recession in the fourth quarter.
Bloomberg reported that the country could lose its last investment-grade credit rating as Moody’s Investor Service is scheduled to release an assessment on Friday. If so, that could lead to heavy outflows, battering the rand even further. The rand weakened to an all-time low on a closing basis earlier this week.
Moody’s changed the outlook on the country’s rating to negative in November.
The rand traded at the following levels against the major currencies:
- Dollar/Rand: R17.75 (1.00%)
- Pound/Rand: R20.69 (1.02%)
- Euro/Rand: R19.07 (1.45%)