The rand’s bad week is set to get worse

South Africa’s rand is on track for its worst week against the dollar since October, and technical indicators suggest more pain is in store for the currency amid rising political risks and concern about the country’s economic outlook.

Gross domestic product data released earlier this week showed South Africa had its worst quarterly performance since 2009 in the three months through March.

Infighting within the ruling African National Congress over the mandate of the country’s Reserve Bank exacerbated losses as investors questioned whether President Cyril Ramaphosa has enough support to advance his reform agenda.

To add to investors’ worries, state-owned companies from Eskom Holdings SOC Ltd. to South African Airways are back in the spotlight, and for all the wrong reasons.

South Africa may be unable to continue supporting electricity utility Eskom, S&P Global Ratings said. The leaderless state-owned airline is continuing its search for a new chief executive while discussing debt terms with banks.

“It’s a case of the perfect Molotov cocktail,” said Matete Thulare, a Johannesburg-based analyst at FirstRand Bank. “Without sounding too gloomy, the picture looks very grim.”

The rand fell as much as 1.2% on Friday, and traded 0.6% weaker at 15.0891 per dollar by 12 noon in Johannesburg, bringing its decline this week to 3.4%, the most since the five days ending Oct. 5.

“The year-to-date upside trend in USD/ZAR remains intact,” said Piotr Matys, a currency strategist at Rabobank in London.

“The underlying trend in the South African economy is clearly weak and the outlook will remain challenging until significant progress is made in implementing structural reforms.”

The rand’s relative strength index, a momentum indicator that signals when a currency is overbought or oversold, shows that the rand has more room to fall.

The measure is still lower than the 70 level which would signal to some traders that the dollar is overbought. Having breached the 75.4% Fibonacci retracement level at 14.98, the rand may target the September high of 15.70.

Read: Rand hits R15 to the dollar

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The rand’s bad week is set to get worse