South Africa’s rand edges firmer as risk demand strained

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South Africa’s rand edged firmer early on Tuesday ahead of mining production data, clinging on to recent gains as investors continued to see value in holding the high-yielding currency despite signs of a creaking economy and climbing COVID-19 cases.

At 0700 GMT, the rand was 0.18% firmer at 16.8125 per dollar, backtracking slightly from Monday’s best of 16.7400 as risk aversion filtered into overnight trading in Asia as tensions between the United States and China resurfaced.

The United States on Monday rejected China’s disputed claims to offshore resources in most of the South China Sea, a move that Beijing criticised as inciting tensions in the region and which highlighted an increasingly testy relationship.

On the local front, ratings agency S&P Global said on Monday that South Africa’s economy will contract by more than initially projected, likely shrinking 6.9% in 2020 compared to an earlier forecast of a 4.5% contraction.

Mining data for May due at 0930 GMT is set to show another deep contraction in the sector after it was in near total shutdown during the early phase of the national coronavirus lockdown.

South Africa has the highest number of confirmed coronavirus cases in Africa, with more than 270,000 infections, and over 4,000 deaths, and is now recording the fourth-largest daily increase in new cases worldwide at more than 12,000 per day. – bbc.com

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