JOHANNESBURG - The rand weakened yesterday as optimism over the global economic recovery faded, with investors turning back to safe haven assets as a second wave of novel coronavirus infections hit South Korea and Germany.
At 5pm, the rand was 0.21percent weaker at R18.36 to the dollar, having touched a session-best R18.2260 in early trade before the New York saw investors tempering their expectations of a quick recovery and backing out of risk currencies.
South Korea warned of a second wave of the virus as infections rebounded to a one-month high.
“A second wave of the disease is seen as a key risk. Additionally, if support measures, particularly monetary stimulus, are withdrawn too quickly, the coronavirus induced economic slump could morph into a broader financial crisis,” said chief economist at Investec, Annabel Bishop in a note.
“The rand is likely to remain volatile, highly susceptible to international events,” Bishop added. “It is still a long way off early March levels, and further retracement will depend on a much greater subsidence in global risk levels.”
The rand eked out gains alongside other emerging market currencies last week, moving further away from the peak above the R19 psychological mark it touched in early April, but lingering concerns over the local economy kept the rally in check.
The stock market softened after a strong close last week as a rebound in coronavirus cases wiped off the optimism of economies restarting globally.
The JSE all share index sank 1.57percent to 50202.85 points while the Top40 index slipped 1.49percent to end at 46359.51 points.
Bonds ended weaker, with the yield on government issue due in 2030 up 13 basis points to 9.425percent.