Rand loses over 3% as fears over coronavirus reignite

The rand's rally of last week has come to an abrupt end, with the local currency losing over 3% on Thursday to breach R17/$.

This follows a grim economic outlook published by the US Federal Reserve on Wednesday – which included a pledge to keep interest rates on the low side until 2022 – as well as a fresh batch of unemployment claims. Initial claims for the week ending 6 June fell to a seasonally adjusted 1.5 million, but analysts have warned the labour market's recovery is likely to be slow.

"It seems that the fallout after the Fed meeting yesterday was the final straw that caused the rand to reverse and give back some of the gains of the past week," said Andre Botha, senior currency dealer at TreasuryONE, on Thursday afternoon.

Calling the reversal "quite an aggressive pull back", Botes said the rand's losses had been amplified by a lack of liquidity in the market.

Fears have reignited over the economic impact of the coronavirus pandemic, as the sobering realisation sinks in that despite the announcement of unexpected job gains last week, the US economy is unlikely to bounce back quickly and scars on its labour market are likely to linger for some time, Botes said.

"It's funny how a day can turn sentiment, and it seems that the overstretch in the rand has finally happened and we can expect [it] to trade a little weaker tonight," he added.

At 17:50 SA time, the rand was trading 3.59% down at R17.11/$, a further dip from R17.07/$ at 17:00.

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