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Rand suffers virus crisis

by Bloomberg
10 Jan 2021 at 07:42hrs | Views
South Africa's rand is feeling the effect of the country's worsening coronavirus crisis.

The currency has weakened for five straight days - the longest streak in five months - as the country contends with a more infectious strain of the virus, surging infections and difficulties in procuring vaccines. That's despite a broadly supportive external environment, with the dollar under pressure and commodity prices rising.

The rand is already the emerging world's biggest loser versus the dollar in 2021. It weakened 2.4% to 15.4354 per dollar by 5:36 pm in Johannesburg, bringing its year-to-date losses to 4,8%, compared with the 3.2% decline of the next-worst performer, Brazil's real.

"The main explanation is related to worries regarding the mutation of the virus and risks for serious lockdowns in the country," said Hans Gustafson, a Stockholm-based emerging-market strategist at Swedbank AB. "The external environment is very positive for the rand with the dollar trending lower and precious metals zooming. If those conditions disappear, the rand is very vulnerable."

The country has only recently secured a deal to receive its first coronavirus vaccines, but barely enough for the country's 1,25 million health workers. President Cyril Ramaphosa and his cabinet are considering tightening lockdown measures, which have already devastated Africa's most industrialised economy, with the central bank forecasting that gross domestic product will contract 8% in 2020.

Source - Bloomberg

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