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JOHANNESBURG - The rand yesterday continued its downward trend against the dollar despite a brief respite after the SA Reserve Bank (SARB) cut interest rates by 100 basis points.
The local currency, which has depreciated nearly 40percent against the greenback this year, pulled to R17.39 as the markets cheered the rates cut as positive.
The JSE All Share Index also continued its fall, easing 1.66percent to 37963.01 points, while the Top40 Index fell 1.37percent to 34239.30 points. Banking and mining stocks remained largely in the red, falling 9.46percent and 5.22percent respectively, while bond yields spiked on as a wave of stimulus from governments around the world failed to quell panic about the coronavirus pandemic.
Economists agreed that the SARB decision would not stop the downward spiral in the market.
“However, the overwhelming negative sentiment in the global landscape will see the economy remain under pressure, regardless of the cut, although the move will bring some welcome reprieve to embattled consumers,” Peregrine Treasury Solutions’ Bianca Botes said. "The rate cut is in line with the global monetary easing taking place in response to the detrimental effect the Covid-19 virus pandemic is having on the global economy.”
Jameel Ahmad, Global Head of Currency Strategy and Market Research FXTM, said SARB followed the global easing train.
“We shouldn't expect a material market reaction, but for global markets to react to the latest virus headlines, and this has been proven from the interest rate moves made from Bank of England, Reserve Bank of Australia and New Zealand, the US Federal Reserve and everywhere else being ignored. We shouldn't expect much reaction at all to this outcome, because there is a far bigger problem facing the world than any central bank decision, a global health disaster,” he said.