Rand plummets amid emerging market suffering and nationwide lockdown

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Banks, the JSE and other essential services will be operating throughout the lockdown period.

Lockdown and the Rand

The Rand is likely to be hurt by this news as production slows and investors flee from the currency. The Rand was already extremely weak before the announcement, but now faces 21 days of next to zero productivity. 

On Thursday last week, the South African Reserve Bank (SARB) cut interest rates drastically by 100 basis points from 6.25% to 5.25%. The Rand had been suffering amid the pandemic, particularly against the US Dollar. This past week, the Dollar gained strength against most currencies. This is most likely due to the Federal Reserve’s ability to stimulate its economy, which has led investors to see the greenback as a haven, leaving the riskier assets and emerging market currencies suffering. The Rand being a proxy for emerging markets, has caused it to plummet into untouched territories, trading at R17.87 to the Dollar on Monday. 

On Friday, Moody’s is expected to review its credit rating on the South African economy. South Africa could lose its last investment grade credit rating. If a downgrade were to occur, we can expect to see heavy outflows, harming the Rand even further. Moody’s is not obliged to provide an updated rating and due to the current circumstances, there’s a possibility that they will postpone it.

Market event calendar

Tuesday 24 March

• South African leading business cycle indicator (MoM) for January: Expected at -0.5%
• Canadian parliamentary debate and vote on coronavirus aid package

Wednesday 25 March

• UK inflation rate (YoY) for February: Expected at 1.5%
• US durable goods orders (MoM) for February: Expected at -0.7%

Thursday 26 March

• South African PPI (YoY) for February: Expected at 4.4%
• UK Bank of England interest rate decision: Expected at 0.1%
• US GDP growth rate (QoQ) Q4: Expected at 2.1%

Friday 27 March 

• US personal income (MoM) for February: Expected at 0.3
• US personal spending (MoM) for February: Expected at 0.3%
• South African Moody’s rating review