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South African rand slides as coronavirus infection rise dims outlook

After a Monday of modest gains, as the rand reflected a recovery in risk appetite on the back of hopes of a strong rebound in China, it is back down

Reuters (Johannesburg) – South Africa’s rand weakened in early trade today (7 July) as worries over surges in coronavirus infections reactivated investor concerns about the economic impact of the pandemic.

At 7am GMT, the rand was 0.43% weaker at 17.0875 per dollar from an overnight close of 5pm in New York as sentiment again swung from optimism to nervousness, with investors continuing to assess the impact of COVID-19.

Deaths from the coronavirus pandemic in India surpassed 20,000 and case numbers increased, with infections in the United States also jumping, dampening global enthusiasm over the easing of lockdowns.

Locally, COVID-19 deaths accelerated past the 3,000 mark, with infections nearing 200,000.

Beyond the lockdown

“Despite the recent easing of local lockdown measures, the current levels of activity in markets have yet to suggest any recovery,” analysts at Nedbank said in a note.

“The rand is currently trading in the middle of the short-term technical range, and the objective on the downside remains around the 16.7000 level.”

Bonds were also weaker, with the yield on the benchmark 2030 government issue rising 11 basis points to 9.625%.

Foreign reserves rise

The Reserve Bank of South Africa has also announced that the country’s net foreign reserves rose to $45.738 billion in June from $45.531 billion in May.

Gross reserves dipped to $52.320 billion at the end of June from $52.769 billion in the previous month, central bank data showed.

The forward position, which represents the central bank’s unsettled or swap transactions, dropped slightly to $555 million in June from $567 million in May.

Mfuneko Toyana

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