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Rand weakens as virus dents risk appetite

South Africa has spent nearly a month under restrictions requiring most of the population to stay at home apart from essential trips, leaving many businesses and individuals struggling.

Picture: EWN

JOHANNESBURG - The rand weakened early on Friday as concerns over the economic damage cause by the COVID-19 pandemic knocked risk appetite, outweighing news that Africa’s most advanced nation will allow a partial reopening of the economy on May 1.

At 0645 GMT, the rand traded at R19.1400 per dollar, 0.21% weaker than its previous close.

South African President Cyril Ramaphosa said on Thursday that from 1 May the government will allow some industries allowed to operate under a five-level risk system.

South Africa has spent nearly a month under restrictions requiring most of the population to stay at home apart from essential trips, leaving many businesses and individuals struggling.

“The news has had no impact on the rand ... as global risk aversion and the impending rebalancing of the World Government Bond Index weigh on the currency,” said Andre Botha, senior dealer at TreasuryONE.

South Africa will fall out of the benchmark World Government Bond Index (WGBI) at the end of April after Moody’s revoked the country’s last investment grade rating in March.

The rebalancing will probably lead to a further selloff in South African bonds. More than R50 billion ($2.62 billion)has already exited South African bonds in 2020.

Government bonds were also weaker in early trade, with the yield on the 10-year instrument due in 2030 rising 6 basis points to 10.910%.