RAND SLIPS AHEAD OF GDP DATA

THE RAND weakened yesterday, as investors dumped the currency a day before gross domestic product data (GDP) expected to show a massive contraction during the country’s strict coronavirus lockdown.

At 6pm, the rand was around 0.93 percent weaker than its previous close at R16.75 to the dollar.

Second-quarter GDP data will be released around today, and analysts polled by Reuters are forecasting a quarter-on-quarter contraction of well over 40 percent, extending a recession that pre-dated the Covid-19 crisis.

Adding to the downbeat mood were power cuts by state utility Eskom, which has long struggled to meet electricity demand because of faults at its ailing coal-fired power stations.

The rand had been on a strengthening trend since mid-August, helped by a healthy investor appetite for riskier emerging market assets and a weak dollar, but those gains are now coming to a halt as the state of the domestic economy comes back into sharper focus.

“The single biggest threat to the ZAR over the longer term is the state of SA’s fiscal position. It is unsustainable,” analysts at ETM Analytics said in a note. “The GDP figure could well be the worst print in a century.”

The broader stock market index moved up again after seven consecutive sessions of losses, boosted by precious metal companies that gained on the JSE on higher commodity prices.

An index of 10 mining companies was up 2.25 percent and the gold mining index was up 2.94 percent at the end of yesterday’s trading.

The all share index rose 0.97 percent to 54 400.28 points, while the Top40 index inched up 0.94 percent to 50 185.43 points.

Bonds were marginally firmer as well, with the yield on the benchmark 2030 government issue falling 4 basis points to 9.19 percent. I Reuters