South Africa's rand on the back foot as recession clouds gather

  • Reuters
  • Forex News
South Africa's rand on the back foot as recession clouds gather
Credit: © Reuters.

JOHANNESBURG, May 4 (Reuters) - South Africa's rand weakened on Monday, dragged lower by a grim local economic outlook and outflows from local bonds after the country officially fell out of the World Government Bond Index (WGBI).

At 0645 GMT the rand ZAR=D3 was 0.15% weaker at 18.8400 per dollar, adding to the previous session's losses to trade at its softest in a week.

Low volumes following Friday's bank holiday added to the weakness, with a dearth of offshore demand available to cushion thin liquidity, widening spreads, and risk-off sentiment sparked by renewed tensions between the United States and China. recent recovery in the rand is in line of a test in its durability following a more negative turn in global market sentiment during the early stages of the new trading month," said Jameel Ahmad, head of currency strategy at FXTM.

National Treasury is forecasting a deep recession this year, with gross domestic product set to shrink by close to 6% as the economy remains in a lockdown aimed at curbing coronavirus infections. regulations for a easing of one the world's strictest lockdowns were only finalised last Wednesday, leading to some confusion when they came into effect on Friday. Only some sectors may restart operations, and with limited staff. were weaker, with yields on the main government debt jumping following the country's official exit from the WGBI as credit downgrades in late March ended the country's last investment-grade rating. 2030 bond ZAR2030= traded at 10.29%, 2 basis points higher.

In stocks, Famous Brands FBRJ.J , owner of restaurant chains including Steers and Wimpy, reported negligible revenue for five weeks as it geared up for the start of delivery-only services following the easing of the lockdown.

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