The rand is tanking
The South African rand has touched an all-time low, thanks to continued concerns surrounding China.
According to a brief by Reuters , the local currency sank to an all-time low of R14.00 to the dollar in the early hours of Monday morning (24 August).
The currency’s previous all-time low was R13.85 to the dollar in 2002.
This was due to rising concerns about waning growth in China, which hit commodity currencies.
Commodities have sunk to 16-year lows, according to the Bloomberg Commodity Index, with sentiment in the market extremely negative. This was fueled by another massive drop in the Chinese stock market.
The local currency has continued to hit new lows across the market, having breached R21 to the pound and R15.35 to the Euro since 21 August.
USD vs ZAR via XE.com
Cees Bruggemans, consultant economist at Bruggemans & Associates, has painted a bleak future for the rand – saying that with continued depreciation, the currency could hit R22.50 to the dollar by 2018.
“If you want to know where the rand will be traveling the next three years, take our underlying inflation differential – about 4%, roughly – and add a dollar appreciation factor and a rand depreciation factor
“What rand decline rate do you get? Not zero – rand appreciating in real terms. Not -4% annually – rand holding its own with dollar in real terms, but more likely something in -6% to -10% territory,” said Bruggemans.
Bruggemans’ estimates put the rand ar R13.45 to the dollar by mid-2016, however, this rate may underestimate the power of the dollar, which gets “turbo power” as other markets (such as China, Japan and Greece) dwindle.
By 08:30 on 24 August, the rand was trading at R13.32 to the dollar.
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