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Africa, Forex

Rand weakens as investors await South African economic recovery plan

JOHANNESBURG (Reuters) – The rand weakened on Thursday ahead of President Cyril Ramaphosa’s unveiling of a recovery plan that investors are awaiting for details on South Africa’s prospects of bouncing back from the coronavirus crisis.

At 0700 GMT the rand was 0.54% weaker at 16.6325 per dollar, from an overnight close of 16.5425 in New York.

South Africa’s economy was already in recession before the COVID-19 pandemic hit, and a lockdown imposed in late March dragged growth to record contraction in the second quarter and cost more than 2 million jobs.

Demand for the rand has, however, been partly supported by the still high yield on offer on local assets despite the central bank cutting lending rates to a record low.

But analysts have warned that these “hot money” flows would dry up without a credible plan for economic growth and debt.

“While global dynamics continue to drive the rand’s short-term movements, domestic developments in the next few weeks, starting today, are likely to determine its long-term path,” ETM Analytics said in a note.

“Investors will be watching the president’s address very closely, looking not only for fiscally responsible growth-enhancing reforms, but for credible fiscally responsible growth-enhancing reforms.”

Ramaphosa is set to address parliament at 1200 GMT.]

Bonds weakened, with the yield on the benchmark government issue due in 2030 up 1.5 basis points to 9.44%.

(Reporting by Mfuneko Toyana; Editing by Alexander Smith)

FILE PHOTO: South African Finance Minister Tito Mboweni gestures as he delivers his Budget Speech at Parliament in Cape Town

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