Rand steady ahead of expected GDP plunge

JOHANNESBURG – The rand rose on Tuesday ahead of second-quarter gross domestic product (GDP) data, which is set to a show a deep contraction in the continent’s most advanced economy.

At 0620 GMT, the rand was up 0.31% at R16.7050 per dollar, helped by a pause in the greenback’s latest advance and some buying before the anticipated growth plunge is expected to trigger a sharp slide in the local unit.

The rand fell nearly 1% on Monday to end at R16.7575 as nervousness about the GDP figure and low liquidity with United States markets closed for a national holiday strained demand.

“The GDP print – which is expected to be the worst in a century – comes against eroding prospects that Q3 will shape up to accelerate the recovery as load-shedding strains business activity,” said analysts at NKC African Economics.

State utility Eskom has been implementing rolling electricity blackouts, or load-shedding, across the country due to failures at its power stations since last week.

Statistics South Africa is set to publish economic growth figures for the three months to June at 0930 GMT. The data covers the most severe impact of the coronavirus lockdown that began in late March and was among the strictest in the world.

Economists polled by Reuters in August now expect an annualised 44.5% contraction in the April-June quarter, compared with the median estimate in a July poll for a 38.7% fall.

The economy contracted 2.0% in the first quarter of 2020, following a contraction of 1.4% in the final quarter of 2019.

Source: EWN News