The rand enjoyed some respite in mid-morning trade on Monday, having weakened almost 4% last week as it touched a more-than-two-year low.
The local unit firmed by more than a percent to R14.46, having briefly broken through the R15.00 level late last week.
The local currency has been caught in a trap of broad emerging market frailty, while the local economic outlook remains gloomy with some analysts suggesting that the country may be entering a recession.
And Bloomberg warned that emerging-market assets may be headed for more tumult.
“A chaotic week for developing nations last week took both stocks and currencies near their lowest levels in more than a year. Despite a rebound in the middle of the week, the lira resumed a sell-off on Friday and traders will probably remain on edge as they wait to see whether the US imposes more sanctions.”
The news agency reported that Turkey’s credit rating was also cut further into junk by S&P Global Ratings and Moody’s Investors Service, which said the volatile currency and wide current-account deficit may undermine the Middle East’s largest economy.
Andre Botha, senior currency dealer at TreasuryOne said that markets may look to focus elsewhere in the new week, while Bloomberg pointed out that some relief may be provided as trading in the lira will be thin this week due to holidays starting Tuesday.
“One gets the feeling that this will become overdone and we might see the market turning its focus somewhere else, and emerging market’s can get some breathing space after running hard for the last couple of weeks,” Botha said.
He added that local factors have not been found to weigh too heavily on the rand, despite the land expropriation issue lurking in the background.
“Until we get a definite plan, there will be a lot of speculation as to the point and the more noise there is, the more the effect will be,” he said.
The week ahead
“Looking forward to the week, we have seen the US dollar slid against most currencies,” said Botha.
“We expect the pullback was mostly due to the market correcting itself after the US dollar went on a tear the last couple of weeks. Speculation that the US and China are trying to settle their differences on trade tariffs. This will further help emerging market currencies should a deal be brokered, but it might take a while before we get there.”
“We expect the rand to stage a bit of a recovery this week as the global dust storm seems to have eased a little.”
A South African judicial commission investigating the alleged plunder of state funds during former president Jacob Zuma’s rule begins public hearings on Monday.
The probe led by deputy chief Justice Raymond Zondo, 58, will likely implicate a number of the African National Congress’s past and serving leaders in what’s widely become known as state capture – reputational damage it can ill afford as it gears up to contest next year’s elections.
Ex-finance minister Pravin Gordhan, who now oversees state companies, has said more than R100 billion ($6.8 billion) may have been stolen.
By 10h35 on Monday (20 August) the rand was trading at the following levels against the major currencies:
- Dollar/Rand: R14.46 (-1.18%)
- Pound/Rand: R18.42 (-1.29%)
- Euro/Rand: R16.51 (-1.49%)