South Africa’s Rand has weakened as investors await SA’s economic recovery plan. Also, bonds weakened, with the yield on the benchmark government issue due in mature in 2030 increased by 1.5 basis points to 9.44%.
The rand weakened on Thursday ahead of President Cyril Ramaphosa’s unveiling of a recovery plan that investors are awaiting for details on South Africa’s prospects of bouncing back from the coronavirus crisis.
At 0700 GMT the rand was 0.54% weaker at R16.63 to an American dollar, from an overnight close of R16.54 in New York.
South Africa’s economy has already hit recession levels before the Covid-19 pandemic hit, and a lockdown imposed in late March dragged growth to record contraction in the second quarter and cost more than 2 million jobs.
High demand for the rand has, however, been partly supported by the still high yield on offer on local assets despite the central bank cutting lending rates to a record low.
But analysts have warned that these “hot money” flows would dry up without a credible plan for economic growth and debt.
“While global dynamics continue to drive the rand’s short-term movements, domestic developments in the next few weeks, starting today, are likely to determine its long-term path,” ETM Analytics said in a note.
“Investors will be watching the president’s address very closely, looking not only for fiscally responsible growth-enhancing reforms, but for credible fiscally responsible growth-enhancing reforms.”
Ramaphosa is set to address parliament at 1200 GMT.