Rand falls after gloomy Fed outlook

The rand slipped on Thursday, tracking emerging markets as bleak economic projections from the US Federal Reserve rattled investors.

At 0635 GMT, the rand traded at R16.71 per dollar, 1.09% weaker than its previous close and giving up gains made on Wednesday when it touched R16.32, its strongest since March 16.

“The gloomy outlook by the Fed brought over optimistic markets back to reality,” Bianca Botes, executive director at Peregrine Treasury Solutions in Pretoria said in a note.

Fed policymakers projected the US economy to shrink 6.5% this year and the unemployment rate to be 9.3% at year-end.

The projections dented hopes that economies would recover more strongly once coronavirus lockdowns are lifted, driving investors away from riskier currencies.

In South Africa investors are awaiting mining output data from March and April, as well as manufacturing output for March to gauge the health of the domestic economy.

Africa’s most industrialised economy was already in recession even before the coronavirus pandemic, and the central bank projected it would shrink 7% this year.

The yield on South Africa’s government bond due in 2030 was up 5 basis points to 9.195% in early trade.