Rand testing R18/$ as global markets flounder

The rand fell by more than 1% against the dollar in early trade on Monday morning, testing the R18/$ level as global markets continue to flounder due the the impact of the global coronavirus pandemic.

The local currency opened at R17.53 to the greenback and was trading 1.3% weaker by 10:00, at R17.86/$. The local unit broke the R17/$ level last week.

Its weakest intraday level yet was R17.91/$ back in 2016, which was caused by a sharp fall in the Chinese market, as Fin24 previously reported.

The JSE Top 40 also had a tough morning, compounding last week's losses to trade down more than 5% by 10:00. Global stocks have been suffering, with the Nasdaq down 3%, the S&P 500 down nearly 4% and the Hang Seng down 2.5%. The Nikkei, however, is up more than 2%.

Andre Botha, a senior dealer at TreasuryONE, attributed this to risk aversion across all markets due to the impact of the Covid-19 pandemic. 

"Markets are on the back foot this morning due to the failure of the Trump administration's $2 trillion fiscal stimulus package to get Senate approval last night," he said. The dollar was trading weaker against the euro and the pound as markets await economic interventions in the world's largest economy, Botha said. A US recession is also expected.

The rand is not the only currency that's bleeding, as other emerging market currencies are also being sold off, Botha added. "The [Russian] ruble and [Mexican] peso are being further hit in the lower oil price which is at $26.05 this morning. Gold is largely unchanged at $1 495.00," he added.

Domestically, all eyes will be on President Cyril Ramaphosa's latest announcements on Covid-19 containment measures, said Bianca Botes, treasury partner at Peregrine Treasury Solutions.

"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," she said. 

The president is due to address the nation on Monday evening, according to Minister Jackson Mthembu. "At that stage the President would have finalized measures to be undertaken to mitigate impact of the virus  to our people and the economy," Mthembu tweeted on Monday.

In his letter to the nation, published earlier on Monday, the president expressed hope that the nation could overcome this challenge.

    Last week the SA Reserve Bank introduced a 100 basis point cut to the repo rate, bringing it to 5.25%, in an effort to arrest the negative impact of the virus on the local economy.

    The local unit had managed to claw back some losses on Friday, after the Reserve Bank announced measures to assist banks by improving liquidity in the market, but the rand still stayed at multi-year lows, analysts from NKC Economics noted in a market update on Monday. 

    ZAR/USD
    16.76
    (-0.05)
    ZAR/GBP
    21.18
    (-0.23)
    ZAR/EUR
    18.94
    (-0.09)
    ZAR/AUD
    11.65
    (-0.04)
    ZAR/JPY
    0.16
    (+0.04)
    Gold
    1798.11
    (+0.03)
    Silver
    18.69
    (+0.17)
    Platinum
    824.50
    (+0.30)
    Brent Crude
    43.14
    (+2.10)
    Palladium
    1961.36
    (+0.61)
    All Share
    55417.89
    (-0.66)
    Top 40
    51154.08
    (-0.74)
    Financial 15
    10472.31
    (+1.28)
    Industrial 25
    76134.69
    (-1.67)
    Resource 10
    52483.78
    (-0.20)
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