Rand slips for the third day in a row
The South African rand’s lucky streak has come to an end as the currency lost value in a third successive session on Monday, hitting its weakest point since the end of May.
The currency weakened to R13.27 at the close of markets on Monday, 1.3% lower than the previous session, and down over 2.6% from its close on Friday.
European banks this week indicated that global policy tightening would continue, pushing traders away from riskier emerging market currencies. Investors have also expressed doubt that the emerging market rally experienced over the past few weeks can continue.
Adding further stress is low liquidity in the market due to the USA’s 4th of July celebrations facilitating a long weekend.
Economists note that the rand’s beating is coming mainly from global events and economic movements, with local factors not being factored in.
Notably, however, the outcomes of the ANC’s policy conference which is now entering its closing days, will likely play a key role in gauging appetite for local investment.
The rand has experienced some surprising strength over the past few months, gaining despite three credit rating downgrades and entering a technical recession.
It experienced a few bumps when the Public Protector released a report recommending that the South African Reserve Bank’s Constitutional mandate be altered – but for the most part, investors have shrugged off local turbulence.
According to some analysts, this is worrying, as lawmakers could take the lack of market reaction as a tacit endorsement of its policies and political moves, which are blatantly anti-investor.
By 8h25 on Tuesday, the rand was trading at R13.21 to the dollar, having recovered very slightly.
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