JOHANNESBURG: The South African rand struck a fresh all-time low against the dollar in early trade on Friday as JPMorgan cut its gross domestic product forecast on expectations of more severe power cuts.
Sentiment soured badly this week with South Africa’s worst power cuts on record showing no signs of abating.
The investor mood worsened after the US ambassador to South Africa said he was confident that a Russian ship had picked up weapons in South Africa last year.
JPMorgan in a research note on Friday said it now forecast a 0.2% decline in South Africa’s 2023 GDP versus a previous forecast of 0.3% growth.
The rand fell as low as 19.5100 to the dollar, down more than 1.6% on its previous close. By 0745 GMT, it had pared some losses, but was still down 1.1% from Thursday’s close, and 5.3% since the start of the week.
“Definitely, the JP Morgan forecast is a big negative for the rand, but I think the market is still fretting about the sale of weapons to Russia as this could possibly cause sanctions against (South Africa),” said Greg Davies, head of wealth at Cratos Capital.
The South African government is opening an independent inquiry, led by a retired judge, into the allegation of an arms shipment to Russia, President Cyril Ramaphosa’s office said on Thursday.
South African rand firmer as dollar weakens
South Africa’s dollar-denominated sovereign bonds also fell with longer-dated bonds suffering the biggest declines and the 2052 issue down 0.8 cents in the dollar, Tradeweb data showed.
The yield on the local 2030 benchmark government bond spiked above 11% for the first time this year, up 23 basis points to 11.11%.
Comments
Comments are closed for this article.