The South African rand hit a new all-time low against the dollar on Friday, extending steep losses from the previous day.
On Thursday, the US ambassador said he was confident that a Russian ship had picked up weapons in South Africa last year.
The U.S. assertion came at a time when investor sentiment towards South Africa had already badly soured over the worst power cuts on record that show no sign of abating.
The South African government is opening an independent inquiry led by a retired judge into the allegation of an arms shipment to Russia, President Cyril Ramaphosa’s office said on Thursday.
By 9.10 am on Friday, the rand was about 1% weaker than its previous close at 19.3900 to the U.S. dollar, taking losses since the start of the week to more than 5%.
JPMorgan in a research note on Friday said it now forecast a 0.2% decline in South Africa’s 2023 gross domestic product versus a previous forecast for 0.3% growth, citing expectations for deeper power cuts.
Source: IOL
Financial markets in South Africa entered a new difficult terrain yesterday as the rand galloped towards the R20-mark to the US dollar following a rapid decline triggered by investor sell-off.
Foreign investors have been dumping South African rand-denominated bonds in favour of safe havens like gold, selling a net R11.4 billion so far.
This rapid sell-off saw the rand breach the psychological R19-mark to the greenback for the first time in three years yesterday, reaching R19.29/$1 at 4pm.
This was the lowest the rand has been since May, 2020, and has fallen more than 10% since the beginning of this year, meaning the rand’s buying power will diminish further.
Traders are concerned that South Africa was raising interest rates slower than the US, causing the differential between South Africa and US interest rates to drop substantially during a risk averse period, which has weakened the rand.
Source: IOL
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