The rand was again pummelled hard on Wednesday, falling 2% for the day against the US dollar.
The local currency, which was the hardest hit among emerging market currencies, fell to R18.68/$ by 17:00, having opened around the R18.30 level and reached an intraday low of R18.81/$ shortly after 15:00 local time. It had recovered to below the R18.00 mark last week.
"The US dollar was on the front foot today, which was a bit curious after the retail figures came in worse than expected at 8.7% after the consensus number was around 8%.
"But the stronger dollar, paired with the immediate selling that happened on Wall Street (Dow and S&P down 2.5%), was not a good combination for the rand," commented Andre Botha, senior currency dealer at TreasuryONE, on Wednesday afternoon.
The local currency had already been impacted by Tuesday's interest rate cut, Botha noted. The SA Reserve Bank’s monetary policy committee cut the repo rate by 100 basis points, or one percentage point, in a bid to curb the economy's downward spiral. The cut brings SA's repo rate to 4.25%, effective 15 April.
The central bank, at the same time, had also revised its forecast for SA's GDP growth, saying it expected a contraction of 6.1%, which sparked a weakening of the rand. The rand did not regain ground on Wednesday, with Botha warning it could slip further, depending on updates for the pandemic.
"As we head into the evening session, the market is decidedly 'risk-off' which could push the rand a little weaker, but risk sentiment could turn on a dime depending on news on the coronavirus," said Botha.
The coronavirus has had a dramatic impact on the global economy. The International Monetary Fund earlier said it expected the global economy to contract by some 3.0% this year due to the pandemic, a decline not seen since the Great Depression in the 1930s.