The rand, which managed to avoid a major blowout following riots in two of South Africa’s key provinces in July, finally gave way and weakened below the psychological R15 to the US dollar level on Thursday.
This is its weakest level since March.
The local currency hit R15.17 to the greenback around 10am, after breaking above the R15 mark in early morning trade on Thursday.
While the decline is being largely attributed to a surging dollar, the fact that the JSE was offline to trading for most of Wednesday may have also been a factor in the currency weakening.
The more than five-hour outage on the JSE prevented trade in stocks “until well into the afternoon on Wednesday” Bloomberg reported.
It said that this was “not a good signal for a bourse that touts itself as Africa’s finest” and “in a country that needs to attract foreign investment to help fuel growth and reduce unemployment”.
Regarding the surging dollar, Andre Cilliers currency strategist at TreasuryONE, flagged in a note on Thursday morning that the US Federal Open Market Committee (FOMC) meeting influenced the stronger dollar.
“Last evening [Wednesday] the FOMC minutes stated that there is a likelihood of the Fed starting the taper off their bond purchases to the back end of this year. The statement of the Fed was also outlined with some misgivings [around Covid and inflation in the US], which have caused the markets to trade in a rollercoaster fashion since the release of the minutes,” he says.
“What did the FOMC minutes mean for the rand? The rand dipped to R14.85 after the release of the minutes, but after the initial drop, the rand weakened in the face of a stronger dollar,” adds Cilliers.
“Currently, the local currency is trading at R15.03, with the momentum stacked against the rand and emerging markets today,” he points out.