South African rand loses value

indafrica June 16, 2020
Updated 2020/06/16 at 7:38 AM

JOHANNESBURG, June 15 (Reuters) – The South African rand tumbled on Monday as investors fled to safe-haven assets on fears of a second wave of global coronavirus infections.

At 1530 GMT, the rand was 1.2% weaker at 17.2600 per dollar, not far off the one-and-a-half week low of 17.34525 it touched earlier in the session.

China’s capital Beijing has recorded dozens of new cases of the novel coronavirus in recent days, all linked to a major wholesale food market, sparking fears that a resurgence could hamper a global economic recovery.

“Markets had been looking forward to a notable pick up in global demand in H2 2020, and market players had been seeking to get in early to position themselves for the return of robust economic activity after the ‘temporary’ COVID-19 halt to growth,” said Annabel Bishop of Investec.

“Any dimming of this outlook weakens market sentiment and so the rand.”

South African government bonds also suffered, with the yield on the bond due in 2030 adding 15 basis points to 9.380%.

Fears of a second virus wave also rattled stocks, with the Johannesburg All-Share index falling 2.55% to 52,270 points, and the Top 40 companies index declining 2.7% to 47,919 points.

“This uncertainty is certainly bad news for emerging markets, especially if widespread risk aversion encourages market players to offload riskier assets in favour of safe-havens,” Lukman Otunuga, senior research analyst at FXTM, said in a note.

Among the decliners were gold producers as bullion prices fell more than 1%, with the dollar hovering near a more than one-week high.

Sibanye-Stillwater ended 6.49% weaker, while Harmony Gold fell 4.62%..

Insurer Discovery declined 2.83% after it warned its full-year profits could fall by up to 90%, hit by a R3.3 billion ($191 million) provision to cover the potential impact on claims and policy lapses due to the coronavirus.

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