South Africa's rand slide accelerates as sentiment sours

JOHANNESBURG: South Africa's rand slumped more than 2pc against the dollar on Thursday, taking losses since last week to almost 5pc, as investor sentiment soured badly on rising COVID-19 infections, a worrying public debt trajectory and the stronger dollar.

Citi said on Wednesday that it had scrapped a trade idea put in place just two days earlier that the rand would strengthen to around 14.53 versus the dollar, making a loss of 3.5pc in the process.

By 1655 GMT the rand was trading at 15.4150 against the U.S. currency, down roughly 2.2pc on the day.

Warren Venketas, an analyst at IG in Johannesburg, said a sharp spike in coronavirus infections overnight was a factor leading the rand to underperform emerging market peers. The rouble was down roughly 1.5pc and the Turkish lira down 0.9pc.

South Africa's health ministry reported more than 21,000 new infections late on Wednesday, taking confirmed COVID-19 cases to date to 1.15 million, the most in Africa.

Coronavirus deaths also jumped by more than 800, taking the total to over 31,000.

Rand assets have rallied in recent months, supported by ultra-loose monetary policy by major central banks.

Traders said the possibility of another interest rate cut by the South African Reserve Bank was also hurting the rand.

UBS head of emerging market strategy Manik Narain said the rand's fall would only become a serious concern if it continued for a couple of weeks.

He added healthy gains in prices for metals the country exports such as gold and platinum could help the current account record a surplus of around 7pc of GDP, a level not seen in 30 years.

Johannesburg-listed stocks advanced for the fourth consecutive day on Thursday, reaching new record highs as global investors bet Democrat control of the U.S. Congress would enable President-elect Joe Biden to borrow and spend heavily.

The Johannesburg Stock Exchange's All-share index ended up 1.92pc at 63,043 points, taking gains since the start of the new year to more than 6pc.

The top-40 index closed up 1.98pc at 58,006 points.