Rand weakens as pessimism mounts over global growth

The IMF cut its global growth forecasts for 2019, a day after data showed Chinese growth fell to a three-decade low in 2018

Further signs that global economic growth is decelerating put the rand under some pressure on Tuesday morning, with the local currency slipping to a one-week low against the dollar.

The International Monetary Fund (IMF) trimmed its global growth forecast 0.2 percentage points on Monday, the same day that Chinese data showed that that country’s economy grew at its slowest pace in 28 years in 2018.

While the IMF adjustment may not seem like much, it was particularly relevant for emerging markets, where most global growth was happening, said TreasuryOne senior currency dealer Andre Botha.

The rand was, however, expected to remain range-bound in the short term, said Botha. Silver linings include a dovish US Federal Reserve, positive developments in the US-China trade talks and the prospect of dollar weakness as the US government shutdown continues.

At 9.30am the rand was 0.57% softer at R13.9039/$, 0.42% at R15.7824/£ and 0.36% at R17.8884/€. The euro was 0.15% weaker at $1.1351.

The bid on the benchmark R186 government note was at 8.915% from 8.9%.

The dollar was playing catchup on Tuesday, after the closure of US markets for Martin Luther King Junior Day.

The beginning of the World Economic Forum (WEF) meeting in Davos is also in focus, with trade war issues expected to be heavily debated among delegates.

gernetzkyk@businesslive.co.za