Rand hammered by fragile sentiment as oil adds to virus threat
JOHANNESBURG - South Africa’s rand plunged by almost 8% against the dollar Monday, touching its weakest level on a closing basis since January 1980, as investors fled riskier assets, with tumbling oil prices adding to nervousness spurred by the spreading coronavirus.
While global sentiment was the largest factor in the rand’s performance -- with the currency seen as a proxy for its emerging-market peers -- local factors including renewed rolling power cuts by Eskom Holdings SOC Ltd. and a downbeat assessment by Moody’s Investors Service of South African growth ahead of its ratings review later this month contributed to the selling pressure.
Eskom warned that its maintenance plan must be supported by the government or South Africa can expect regular blackouts from power cuts of 8,000 megawatts by mid-2021, a move that would cripple the economy. The power utility said it will implement rolling blackouts from 9 a.m. on Monday, which may continue until Thursday. Moody’s said on Friday it had trimmed its 2020 gross domestic product growth forecast for Africa’s most industrialized economy to 0.4% from 0.7%.
The rand slid for a third day, falling as much as 7.7%. It pared the losses to be 3.2% weaker at 16.1884 per dollar as of 7:55 a.m. in Johannesburg, the lowest since February 2016 on a closing basis.
The yield on rand-denominated government bonds due December 2026 jumped 19 basis points to 8.19%, while generic 10-year notes were little changed at 9.04%. Non-residents were net sellers of 2.7 billion rand ($169 million) of South African bonds on Friday, according to figures from exchange operator JSE Ltd.