Rand falls as deep recession fears weigh

The rand fell early on Thursday, as concerns of a deep economic downturn due to the COVID-19 pandemic rattled already shaky risk appetite.

At 0615 GMT, the rand traded at R18.70 per dollar, 0.16% weaker than its previous close.

The International Monetary Fund said on Wednesday sub-Saharan Africa’s gross domestic product was on track to shrink this year by 1.6% – its worst performance on record – because of the combined effects of the coronavirus and plummeting oil and commodities prices.

In South Africa, the IMF projects the economy, already in recession, will shrink 5.8%.

That grim outlook added pressure to the rand, which was already reeling after the South African Reserve Bank slashed lending rates to their lowest ever. That weakened its attraction as a “carry trade” currency, which depends on repo rates remaining high.

The rand has dropped around 33% since the beginning of the year.

In fixed income, the yield on the 10-year government bond due in 2030 was up a single basis point at 10.600%.