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Rand weakens as coronavirus worries weigh

Since Monday’s sharp fall to just shy of R17.00, the rand has managed to claw back some ground, but ongoing uncertainty about the effectiveness of measures taken by central banks globally to limit the coronavirus has kept volatility elevated.

Picture: pixabay.com

JOHANNESBURG - The rand weakened on Wednesday as another bout of risk aversion dragged emerging market currencies lower, with investors fretting over the impact of the coronavirus and opting for safe-haven assets.

Stocks fell, as a drop in oil prices hit chemical and energy firm Sasol.

At 1510 GMT, the rand was 1.03% weaker at R16.1100 per dollar against an overnight close of R15.9460 in New York, once again crossing the key technical threshold of R16.00 that traders have used to gauge likely direction of the rand’s moves.

Since Monday’s sharp fall to just shy of R17.00, the rand has managed to claw back some ground, but ongoing uncertainty about the effectiveness of measures taken by central banks globally to limit the coronavirus has kept volatility elevated.

News that state power firm Eskom would cut up to 4,000 megawatts of electricity from the national grid, partly due to faults at its Koeberg nuclear plant, has also rekindled bearish bets on the local unit.

“Although a degree of calm has returned to the world’s financial markets, there are various factors that could change this instantly,” Nedbank’s Reezwana Sumad said in a note.

“Locally, the rand remains exceptionally vulnerable. Any strength has been limited and moves to the topside have been more extreme, exacerbated by the persistent woeful performance of the electricity utility.”

In equities, the Top-40 index was down 0.82% to 43,891 points while the broader all-share fell 0.79% to 49,074.

Sasol was the biggest decliner, sitting at the bottom of both indexes, down 26.44% to R52.72.

Oil prices fell on Wednesday after Saudi Arabia and the United Arab Emirates announced plans to boost production capacity and OPEC and the US Energy Information Administration cut oil demand forecasts because of the coronavirus.

Shares in Africa’s largest mobile network by subscribers, MTN, fell 1.72% after it said Chief Executive Officer Rob Shuter would step down at the end of a four-year term in March 2021.

In fixed income, the yield on the benchmark 2030 government issue was up 6 basis points to 9.26%.