Rand retreats amid worry about spread of coronavirus
The local currency is weaker as markets slump, with investors taking a back seat as they gauge the effect of the virus on the global economy
The rand retreated against major currencies on Monday morning as global markets slumped amid the spread of the deadly coronavirus, with investors taking a back seat as they gauge the effect of the virus on the global economy.
At 11.29am the rand had weakened 0.84% to R14.5579/$, 0.66% to R16.039/€ and 0.82% to R19.0487/£. The euro had fallen 0.13% to $1.1017. The rand has lost 3.8% against the dollar so far in 2020.
European stock markets were hammered early on Monday as contagion contaminated market sentiment and as investors fretted over the spread of the coronavirus, retreating to safe-haven assets.
“Domestic issues aside, the rand endured quite a dull week as it traded within the wider R14.30-R14.60 range for most of the time. Only an all too brief foray to R14.2750 challenged that, but it was very short-lived,” said Standard Bank trader Warrick Butler.
“The world has pushed to Wuhan coronavirus to the forefront of its attention and, given the impact on the Chinese New Year (which incidentally has been extended now) plus the fear factor of it spreading in a hurry globally, has caused a risk aversion environment,” Butler said.
On Thursday, the World Health Organisation (WHO) said that the outbreak of the coronavirus did not yet constitute a global public health emergency. However, more than 2,700 people in China are now said to have been infected by the fast-spreading virus while more countries have reported their first confirmed cases.
The WHO’s director-general will travel to Beijing to meet the government and health officials. According to the organisation, more data needs to be collected before the virus, which can spread through human-to-human contact, is declared a global health emergency, reported CNBC.
The weak economic growth outlook for SA is weighing on the local currency after the SA Reserve Bank and International Monetary Fund (IMF) downgraded their growth predictions for the country earlier in January, affecting the demand for rand assets.