On Friday, 7thFebruary, the rand hit R15 against the dollar as emerging markets took a hit on news that the death toll connected to the Wuhan coronavirus is increasing.
As the death toll reached 636 in China, with the majority of deaths being reported in the Hubei province, an index of emerging market equities fell 0.6%, according to Reuters.
In the previous session, data showed that in January business confidence in the country fell and now the rand has slid even further. This year we have experienced the worst power cuts in a decade and a jerky economic growth that has led to the currency lagging its emerging market peers.
According to the Guardian, the coronavirus infections within China are at 31 161 and global infections have passed 280 in 28 countries.
After the Department of Health in KwaZulu-Natal said that it was testing two people for the Wuhan coronavirus, South Africa has been on high alert. The patients, however, have been given the all clear, but there is a fear that it will only be a matter of time before we have our first case.
China’s economic growth has also been cut by 0.75 percentage points by S&P saying that the country’s economy will take a big hit because of the coronavirus and the rest of the world will feel it.
The Rand is at Risk
According to a recent Reuters poll, the rand and other emerging markets are at risk of weakening in February if the Wuhan coronavirus spreads. According to Annabel Bishop, chief economist at Investec, South Africa is more likely to receive a downgrade from Moody’s if the rand approaches and exceeds R16/dollar this quarter. The currency has already reached a low base due to the virus impact on risky assets.
At the end of next month, South Africa has a credit review due. If Moody’s lowers its rating to junk, then investors will automatically sell its bonds.
Article Source: https://businesstech.co.za/news/finance/372016/rand-hits-r15-dollar-after-news-of-increase-in-wuhan-coronavirus-deaths/