The rand lost further ground against the US dollar on Tuesday, after a move by the Reserve Bank to temper the local unit’s volatility began to lose it’s shine.
An aggressive increase by 50 basis points in the repo rate, along with better than anticipated trade data on Friday, led to the rand going on a run over the weekend.
The currency firmed to R15.89 against the US dollar, having reached a worst level of R17.99 on 11 January, after president Jacob Zuma defended his well documented appointment blunder within the finance department.
On Tuesday however, the rand gave up more than a percent to the US dollar, trading at R16.06 by 13h40, while the local unit was also weaker against the British pound, at R23.10, and was at R17.52 against the euro.
Reuters said that a ‘dim global outlook’ put emerging market assets on the back foot.
It reported that weak factory production figures from China on Monday stemmed risk appetite, citing traders.
South Africa’s trade surplus widened to a surprise R8.22 billion in December from R683 million in November. The expectation was for a surplus of R1.8 billion.
The rand went into a free-fall following the announcement on 9 December by president Zuma that he had replaced Nhlanhla Nene with unknown ANC MP David van Rooyen, only to replace him three days later with Nene’s former boss Pravin Gordhan.
Gordhan brought some stability to the currency market, however external factors incuding growth concerns in China, the commodities price slump and dollar strength kept the rand in check.
On 20 January the currency was still trading at R16.89 against the dollar.
Eyes and ears next turn to Gordhan’s budget speech on 24 February, as the finance head tries to defend the country’s credit rating and avoid it being downgraded to junk status.
More on the rand
SA interest rate hiked 50 basis points to 6.75%