South Africa's rand retreats as coronavirus worries weigh

South Africa’s rand weakened early on Wednesday as another bout of risk aversion dragged emerging market currencies lower, with investors fretting over the economic impact of the coronavirus and opting to move money to safe-haven assets.

At 0630 GMT, the rand was 0.56% weaker at 16.0350 per dollar against an overnight close of 15.9460 in New York, once again crossing the key technical threshold of 16.00 that traders have used to gauge likely direction of the rand’s moves.

Since Monday’s sharp fall to just shy of 17.00, the rand has managed to claw back some ground but ongoing uncertainty about the effectiveness of measures taken by central banks globally to limit the impact of coronavirus has kept volatility elevated.

News that state power firm Eskom would cut up to 4,000 megawatts of electricity from the national grid, partly due to faults at its Koeberg nuclear plant, has also rekindled bearish bets on the local unit.

“Although a degree of calm has returned to the world’s financial markets, there are various factors that could change this instantly,” Nedbank’s Reezwana Sumad said in a note.

“Locally, the rand remains exceptionally vulnerable. Any strength has been limited and moves to the topside have been more extreme, exacerbated by the persistent woeful performance of the electricity utility.”

Bonds were steady, with the yield on the benchmark 2030 government issue down 0.5 basis points.

In equities, lender Absa posted a 3% increase in full-year profit, but warned it would take longer to achieve its 18% to 20% return on equity (ROE) target as the economy splutters.

Africa’s largest mobile network by subscribers, MTN, said on Wednesday its group chief executive, Rob Shuter, would step down from his role in March 2021.