The rand weakened in early trade on Monday, resuming its downward trend from the week before, as the safe-haven dollar strengthened amid global growth fears.
At 0632 GMT, the rand traded at R16.94 against the dollar, down 0.19% from its previous close.
The rand was within a touching distance of hitting R17.00 on Monday, after trading at R16.99 earlier, a level unseen since September 2020.
The dollar index, which measures the currency against six counterparts, was up 0.32% and last trading at 107.42. The currency surged to a 24-year high on the yen in morning trade.
The rand was battered last week and hit multiple lows as investors sought the safety of the US dollar at a time of high economic uncertainty as fears over a looming global recession grow.
“Mounting global growth fears are also supporting the safe-haven USD this morning. Emerging market FX is also broadly negative ahead of the European open, with the ZAR leading the decline,” ETM Analytics said in a research note.
Some commentators quickly blamed the escalating power interruptions and the expected impact on the economy for the rand’s blues.
However, Bianca Botes, director at Citadel Global, says that although load shedding negatively affects economic growth and sentiment, the weak performance of the rand stems from numerous factors.
“Eskom simply switching the lights back on will not result in a significant rebound,” she says.
Izak Odendaal, investment strategist at Old Mutual Wealth, notes that sentiment turned against the rand over the past few days as the implications of Stage 6 load shedding sank in, but “for the most part, the currency has responded to global forces”.
Until recently, the rand has been supported by elevated commodity prices, but recent dollar strength has exerted downward pressure, he says.
Investors’ eyes will be on US CPI data due Wednesday and markets would likely interpret a high reading as a sign the US Federal Reserve would need to raise rates even more aggressively to combat inflation.
The government’s benchmark 2030 bond was flat in early deals, with the yield at 10.620%.-moneyweb
