The coronavirus pandemic is on a prowl and it is now leaving currencies in its wake. After tearing holes in the value of the Nigerian Naira and the Kenyan Shilling, the outbreak has the South African Rand in its sights.
As of today, the Rand lost its strength, showing symptoms of falling to an all-time low against the dollar, thanks in part to the stricter measures already weighing on user sentiments.
As at 0700 GMT the South African Rand traded 1.2 percent weaker at 17.7380 per dollar against a close of 17.5310 on Friday (March 20th). Reuters reports it edged closer to an all-time worst level of 17.9950 which it reached in late 2015.
The exchange rate is plummeting down to new levels as the exodus of capital from emerging market economies goes on.
The Johannesburg Stock Exchange’s blue-chip top-40 index and the broader all-share index were down by around 7.5 percent. Many financial firms suffered, with the banking index down 12.17 percent..
At the end of last week, it fell to a more than four year low, stocks sunk back to 2013 levels and bond yields spiked on Wednesday (March 18th).
One telling reason is the wave of stimulus from governments around the world failing to quell panic about the coronavirus pandemic.
Speaking of which, President Cyril Ramaphosa—who declared a national state of disaster on March 15—was supposed to hit the press with more measures Sunday evening. But the address was shifted, which raised rumors that his administration is contemplating a total shutdown.
All of the market pressures are mounting on the South African Reserve Bank. However, a key interest rate decision is due Thursday when it will cut rates to shore up the adverse effects of COVID-19.
Recall that South Africa only just entered another economic recession after its economy contracted in the last quarter of 2019. So it is easy to see why the pandemic is already and will further make matters worse, especially as tourist arrivals and commodity exports to China take big hits.
Image: Quartz Africa