Rand tumbles as IMF stokes recession fears

The currency was 2% weaker at 18.6770 per dollar by 1500 GMT, straying back into bear market territory as investors were spooked by a dire global growth outlook from the International Monetary Fund (IMF).

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JOHANNESBURG - The rand tumbled on Wednesday as concerns grew of a deep global recession concentrated in emerging markets, adding to a selloff triggered when the central bank unexpectedly cut local lending rates the previous session.

The currency was 2% weaker at 18.6770 per dollar by 1500 GMT, straying back into bear market territory as investors were spooked by a dire global growth outlook from the International Monetary Fund (IMF).

The rand has dropped around 20% over the past month.

The IMF on Tuesday forecast the global economy would mark its steepest downturn since the Great Depression of the 1930s because of the coronavirus-driven collapse of activity.

The IMF sees Sub-Saharan Africa’s GDP shrinking 1.6% because of the combined effects of the disease and plummeting oil and commodities prices. That is a turnaround of around 5.2 percentage points compared with its pre-pandemic growth forecast.

That grim outlook rekindled dollar-buying as investors sought safety, adding pressure to the local currency already reeling after the South African Reserve Bank slashed lending rates to their lowest ever, weakening the so-called “carry trade” that depends on repo rates remaining high.

The rand had managed a 6% rally in the last week, coming off an all-time low of 19.3590, but has retreated in the last two sessions on profit-taking and renewed recession fears.

Equities in Johannesburg also slid, with the all-share index down 3.15% to close at 48301.28. The top 40 companies’ index fell 3.02% to 44202.90 points.

The fall was mainly led by the country’s banks with the banking index down more than 8%.

Bonds also weakened with the yield on the government issue due in 2030 rising 17 basis points to 10.59%.