Rand recovers after record low

The rand recovered in late afternoon trade on Monday after falling to a record low of R19.35 to the US dollar.

By 5:30pm it had risen to R18.73, but is still down about R4.70 from the R14 it was trading at at the start of the year.

The local currency has been weighed down by the ongoing economic crisis brought on by the Covid-19 pandemic. Most of SA’s businesses have shut up shop for the three weeks of the nationwide lockdown aimed at slowing the spread of the deadly virus.

The lockdown – which is set to end at midnight on Thursday, April 16 – is expected to put further pressure on an already struggling economy that is in recession. This dire state is not expected to change quickly as the South African Reserve Bank expects GDP to shrink by as much as 4% in 2020.

The rand also weakened against leading currencies after Moody’s downgraded South Africa’s credit rating to ‘junk’ status last month. This move means some overseas-based asset managers will be forced to sell local bonds as their mandates prohibit them from holding non-investment grade securities.

Moody’s was the last of the three major rating agencies (after S&P and Fitch) to downgrade SA to non-investment grade.

The country’s credit rating took another blow on Friday when Fitch downgraded SA’s foreign-currency rating to ‘BB’ from ‘BB+’.