JOHANNESBURG – South Africa’s rand edged firmer early on Wednesday, shaking off data revealing the economy was already in contraction before the coronvirus lockdown as investors looked to pocket the local unit’s high yield while awaiting key data globally.
At 0720 GMT the rand was 0.21% firmer at 17.3100 per dollar, having hit a three-session low on Tuesday after economic data showed gross domestic product had contracted for a third consecutive quarter in the first three months of the year.
Africa’s most advanced economy has now shrunk in four out of the last five quarters, and is also on the cusp of a debt crisis as the government borrows more to plug budget deficits enlarged by the lockdown to curb COVID-19 now in its fourth month.
“The deepening of the recession is set and thus priced into the ZAR exchange rate,” said Elisabeth Andreae of German bank Commerzbank.
“However, markets are likely to be interested above all in how quickly the economy will come out of the trough – in particular in comparison to others. This is likely to be above all a question of time and (financial) resources.”
While globally focus will be on purchasing managers’ index releases (PMI) and the release of the minutes of the Federal Reserve’s last policy meeting, the local calendar sees the publication of car sales and a manufacturing survey.
Bonds were also firmer, with the yield on the benchmark 2030 issue down 2.5 basis points to 9.245%.
Reporting by Mfuneko Toyana; editing by Philippa Fletcher