Rand edges firmer in cautious early trade
The rand edged firmer in tentative early trade on Wednesday, as investors weighed a surge in coronavirus infections in key global centres and more signs of a creaking local economy.
JOHANNESBURG - The rand edged firmer in tentative early trade on Wednesday, as investors weighed a surge in coronavirus infections in key global centres and more signs of a creaking local economy.
At 0700 GMT, the rand was 0.23% firmer at R17.1400, retracing a fraction of the previous session’s sharp losses that dragged the unit to a 1-week low as investors' attention turned to climbing COVID-19 infections around the world.
Domestically on Tuesday, a survey showed consumer confidence plunged to a 35-year low in the second quarter, while ratings firm Fitch warned about the country’s ability to execute plans to slash spending, also hurting the rand.
But flows back into the rand overnight were helped by data from China showing a solid recovery for industrial production in the world’s no.2 economy, demand from which accounts for a big slice of South Africa’s export revenue.
A continuing jump in COVID-19 cases in the United States, however, paired with a warning from its central bank that its economy would struggle to shake-off the impact of the pandemic boosted safe-haven demand for the US currency.
In Australia lockdown measures were reimposed in the country’s second-biggest city Melbourne, feeding investor concerns about the likelihood quick bounce in global economic activity.
“South Africa’s economic fragilities have rendered the ZAR vulnerable to external shocks, meaning the currency will remain at the mercy of broader sentiment dynamics,” said market economists at ETM Analytics in a note.
“(But) with nothing in the way of noteworthy data on the cards today to shift the spotlight back to global economic recovery prospects, the market’s focus may remain fixated on the coronavirus pandemic.”
Bonds were weaker in early bids, with the yield on the benchmark government issue due in 2030 up 3 basis points to 9.715%.