Rand hits lowest level yet

struggling even before the virus outbreak. On the other hand, they may see the heightened risk of a prolonged recession, oil below $30 a barrel and rate cuts elsewhere as giving them room to act aggressively.

“The rand weakening this much is always something that the Reserve Bank will consider — they normally then worry about the pass-through to high inflation down the line,” said Maarten Ackerman, chief economist at Citadel.

“But having said that, at this point in time the economy is on its knees and central banks around the world are cutting rates left, right and centre.”

This presented the Bank with an opportunity to cut by more than the “normal” 25 basis points, he said.

An aggressive move may present its own risks to SA’s financial markets, potentially accelerating outflows at a time when SA is facing a potential loss of its remaining investmentgrade rating within weeks.

A downgrade by Moody’s Investors Service later in March could see foreign investors dump the country’s assets as they fall off global indices, putting more upward pressure on bond yields as SA struggles to attract capital.

The rand dropped as much as 3.1% to R17.1352/$, the weakest level since January 2016 on an intraday basis. It was at R17.1285/$ just after 6pm, the weakest to date on a closing basis. A broader measure of the rand against the currencies of SA’s biggest trading partners fell to its weakest level since 2016, which might be a bigger consideration for the Bank when looking at the inflationary implications of a weaker currency. Rand weakness “may encourage them to be a little conservative with their easing”, said Craig Erlam, a market analyst at Oanda in London.

But “coronavirus is comfortably the greatest risk to the global economy at the moment and will be the primary driver for central banks around the world”, he said.

Yields on the country’s generic 10-year bonds, which move inversely to the price, jumped 62 basis points to 11.36%, the highest since November 2002, and up from just 8.85% two weeks ago.

Notes with three-year maturities were also taken to the cleaners, with the yield jumping 58 basis points to 7.12%.

The JSE all share dropped 7.2% on Wednesday, taking its 2020 loss to 32%.

3.1% Wednesday’s worst drop in rand to R17.1352/$, its weakest level since January 2016