Rand on edge over fears of second coronavirus wave in China
Fears of a second wave of Covid-19 are adding jitters to the market, as Beijing entered partial lockdown following a cluster outbreak of the disease.
“The rand remains under pressure, while the new outbreak fears will likely cause the unit to test a break weaker, towards the R17.30/dollar mark,” said Bianca Botes, executive director at Peregrine Treasury Solutions.
This has been echoed by international analysts who warn that a second wave of outbreaks could hit everything from commodities to emerging markets.
“If we do see China get a setback like a second wave of infections, the fear is that the rest of the world will see another wave as well,” said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia.
China is now racing to control a new outbreak in Beijing that reached nearly 100 infections over the weekend, providing the biggest test of the country’s coronavirus containment strategy since the pathogen first emerged in Wuhan, Bloomberg reported on Monday (15 June).
Officials are fanning out over housing compounds, knocking on doors to question residents on whether they’ve been to or had had contact with anyone who’s visited the city’s largest fruit and vegetable market, Xinfadi, where the new outbreak is believed to have originated.
“The risk of virus spread is very high, and resolute and decisive measures are needed to prevent further spread,” Chinese vice premier Sun Chunlan said during a state council meeting on Sunday, according to state media.
While China’s contained outbreaks in its central and northeastern regions through oppressive lockdowns, it’s never had a significant flare-up in a major city until now, Bloomberg reports.
Emerging market sell-off
South Africa and other emerging markets also posted their first weekly declines in a month last week amid separate concerns that a second wave of coronavirus infections is gaining ground in America.
Thursday saw a sharp reversal for the rand that notched up gains of more than 11% since the start of May.
The Federal Reserve warned the road to a full US recovery will be a long one, outweighing optimism surrounding its commitment to keep pumping stimulus into the economy.
Investors in South African assets have tended to overlook a grim domestic economic outlook in recent weeks, focusing on government measures to cushion the blow from Covid-19 and the attractive yields of local government debt over worrying fiscal metrics or recent credit rating downgrades, Reuters reports.
In morning trade on Monday, the rand traded at the following levels against the major currencies:
- Dollar/Rand: R17.28 (+1.24%)
- Pound/Rand: R21.55 (+0.8%)
- Euro/Rand: R19.44 (+1.13%)
Read: 70,038 confirmed coronavirus cases in South Africa as deaths climb to 1,480
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