Rand dives to 11-month low in global risk-off environment
The rand was weaker against major global currencies on Thursday, and the worst performing among emerging-market currencies, as investors digested a heavy risk-off week in which it breached R15/$.
The local currency weakened to its worst level in 11 months on Thursday, testing R15.20/$ as worries about SA’s credit rating escalated this week after Moody’s Investors Service warned about the need to restructure Eskom.
A US-China currency spat earlier this week also added to the rand’s woes as there appears to be no end in sight to the US-China trade war.
At 2.30pm, the rand had weakened 0.72% to R15.1632/$, 0.64% to R16.9718/€ and 0.73% to R18.4136/£. The euro was flat $1.1191.
Gold had fallen 0.3% to $1,496.96/oz and platinum 1.07% to $854.97. Brent crude was down 0.85% to $56.94 a barrel.
The benchmark government 10-year bond was stronger, with its yield falling 1.5 basis points, or 0.015 percentage points, to 8.35%. Bonds yields move inversely to bond prices.
Mining and manufacturing output for June, published by Statistics SA on Thursday, raised some concern about the state of the local economy. Mining contracted 4.2% year on year from a drop of 1.5% in May while manufacturing fell 3.2% in June from the previous year, its first contraction in nine months. A contraction of 2.2% was the consensus for mining output and expansion of 1.6% for manufacturing, according to Bloomberg polls.
“While this disappointing report [manufacturing output] certainly strengthens the case for the SA central bank to cut interest rates, rising inflation could become an obstacle,” FXTM research analyst Lukman Otunuga said in note.