Rand buckles on introduction of the latest Covid-19 restrictions

THE RAND opened the week under pressure, reversing some of its previous week’s losses on a stronger dollar after the government tightened Covid-19 restrictions. The domestic currency traded 0.10 percent lower at R14.20 against the dollar by 5pm yesterday due to restrictions to cope with the speed of new Covid-19 infections.

President Cyril Ramaphosa on Sunday banned all gatherings for 14 days, along with the sale of alcohol, dining in restaurants and travel to or from the worst-hit areas of the country.

An extended curfew was also imposed and schools would shut early for holidays to curb the high rate of infections and relieve pressure on the healthcare sector. South Africa’s rising cases are part of a resurgence across Africa linked to the spread of the delta variant.

The country is struggling to vaccinate even a small percentage of the population as the rollout of vaccines remains slow.

TreasuryONE currency speciality Andre Cilliers said the rand was trading back above R14.20 level following stricter lockdown restrictions to fight rising Covid 19 infections.

On Friday, the currency managed to firm to R14.02 levels before closing at R14.09 to the greenback. “We expect the rand to remain fairly range-bound for now as it tracks international currency movements,” Cilliers said.

The move to adjusted level 4 lockdown amid the prominence of the highly contagious Delta strain of the Covid-19 left the rand under pressure.

Investec chief economist Annabel Bishop said the rand failed to strengthen further on ongoing market concerns over the rapid increase in the third wave amid a poor vaccine rollout. Bishop said the run in strength is likely over for the rand currently.

“While the rand is expected to gain from higher interest rates, it is more than strong enough already not to provide any inflationary pressures,” she said.

Bishop said the government should increasingly allow the private sector to administer, obtain vaccines and accelerate delivery in order to prevent a likely fourth wave down the line.

She said the tardiness permeating the government delivery, from the vaccination drive, and failure to have sufficient public health care facilities opened, had aided the third wave.

“South Africa’s economy will consequently suffer from tighter restrictions as the pandemic’s reach firms its hold, with little change in the will of the government to massively boost private sector participation,” she said.