Ahead of the 21-day lockdown period, we have been flooded with calls from clients who are looking for support and guidance during this period of volatility.
The Coronavirus will affect our entire nation, many South African SME’s will face financial difficulties as a result of the Covid-19 outbreak. While it’s not quite business as usual here at FX Paymaster, we’d like to reassure everyone that we are fully operational.
Over the next few weeks, we will continue to publish daily forex news and share market insights to help businesses with exposure to international currencies protect their foreign payments from further impacts.
Will Moody’s skip its ratings decision on South Africa because of the coronavirus?
As it stands Moody’s is due to deliver their credit rating decision for South Africa this Friday, but they are not obligated to do so. Given the circumstances, they may even decide to skip it. Our ability as a country to repay our debt is still under question and remains a risk, especially while we’re still in a recession.
Should Moody down grade South Africa’s sovereign credit rating, it’ll have a major impact on the local bond market and the value of our currency. In fact, just in March 2020 (since the budget and start of Coronavirus) we’ve seen foreign investors sell off around R 60 Billion worth of local bonds. This level of capital outflow obviously has a major impact on the value of our currency, and this is the reason why our Rand has deteriorated so quickly.
It’s inevitable, South Africa’s public debt will skyrocket in coming months as our GDP reduces. We expect the South African Reserve Bank will cut interest rates even further to make borrowing cheaper and encourage spending to boost the economy. While this may be good for local consumers it will have a negative impact on foreign investment, especially in the short term.
While the country is in lockdown, what should I do if I need to buy currency or make a payment?
First of all, don’t panic. We understand that a developing situation like the Coronavirus can be extremely worrying. Your team at FX Paymaster is set up to work remotely, so you will have the financial freedom to move your money electronically over this period.
Pay attention to what the Rand is doing.
In times like this, it’s not uncommon for the South African Rand to move 20-30 cents a day. An effective currency buying strategy is all about timing. Using specialists tools, systems and market experience to monitor the forex market in real time, FX Paymaster can advise on the best timing. Our dealing desk continually evaluate market trading conditions and share this information with clients allowing them to make more informed currency buying decisions.
At this stage, we don’t know the full impact that the Coronavirus will have on our economy and whether our government action will be enough to get the outbreak under control. The impact on markets and our currency – really depends on how widespread the outbreak becomes.
If your business is exposed to fluctuations in foreign exchange markets, FX Paymaster can work with you to optimise your payments, minimise your risk, and manage your costs.
