JOHANNESBURG (Reuters) – South Africa’s rand plunged to an all-time low on Monday, falling below 18.00 to a dollar after ratings firm Moody’s cut the country’s last investment grade credit rating, adding to mounting panic about the coronavirus outbreak.

At 0600 GMT the rand was 1.42% weaker at 17.9100 per dollar, pulling back slightly from the all-time low of 18.0800 it crashed to in Asian trading, indicating that the fallout of the coronavirus-led lockdown is likely to hurt local assets.

Moody’s downgraded the rating one notch to ‘Ba1’ from ‘Baa3’ and maintained a negative outlook, meaning another downgrade could follow if the economy performs worse or government debt rises faster than expected.

It was the last of the top three ratings firms to downgrade Africa’s most industrialised economy to sub-investment grade, following S&P Global and Fitch’s downgrades in 2017.

The latest ratings cut will see South Africa kicked out of the benchmark World Government Bond Index (WGBI) of local-currency debt, triggering up to $12 billion of forced selling, treasury and analysts estimate.

Bonds were also weaker, with yield on the benchmark government bonds due in 2026 rising 72.5 basis points to 11.215%.

“We have previously argued that much of the downgrade has already been priced in and that we do not expect a capital exodus following the decision,” analysts at NKC Economics said in a note.

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“However, the global economic environment has changed considerably since the start of March.”

South Africa’s confirmed coronavirus cases increased by 93 to 1,280 on Sunday and the death toll doubled to two. The country is its fourth day of a national lockdown and officials announced new measures to deal with the economic fallout.

(Reporting by Mfuneko Toyana; Editing by Vinay Dwivedi)

This article was first published on Reuters Africa https://af.reuters.com/article/investingNews/idAFKBN21H0S6-OZABS and is republished with its permission.

For more coverage on COVID-19 visit: https://www.cnbcafrica.com/covid-19/

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