New virus wave weighs on rand

JOHANNESBURG – The rand weakened yesterday as optimism over the global economic recovery faded, with investors turning back to safe haven assets as a second wave of novel coronavirus infections hit South Korea and Germany.

At 5pm, the rand was 0.21percent weaker at R18.36 to the dollar, having touched a session-best R18.2260 in early trade before the New York saw investors tempering their expectations of a quick recovery and backing out of risk currencies.

South Korea warned of a second wave of the virus as infections rebounded to a one-month high.

“A second wave of the disease is seen as a key risk. Additionally, if support measures, particularly monetary stimulus, are withdrawn too quickly, the coronavirus induced economic slump could morph into a broader financial crisis,” said chief economist at Investec, Annabel Bishop in a note.

“The rand is likely to remain volatile, highly susceptible to international events,” Bishop added. “It is still a long way off early March levels, and further retracement will depend on a much greater subsidence in global risk levels.”