After hitting a high of R14.85/$ earlier today, the rand has subsequently lost some 1.3% to trade around R15.12/$.
According to Bianca Botes,Treasury Partner at Peregrine Treasury Solutions, the rand came under pressure along with other emerging economies amid a sell-off in riskier markets.
As with much of the rand’s recent weakness, the rand has been battered more by international movements than local factors – though poor local data and market sentiment has not helped.
South African business confidence fell to the lowest level in four months in July as concerns over political uncertainty and state companies’ finances outweighed the positive effects of lower interest rates and higher commodity prices.
An index measuring sentiment declined to 92 from 93.3 in June, the South African Chamber of Commerce and Industry said Wednesday in an emailed statement. The median estimate of 4 economists in a Bloomberg survey was 93.
Botes noted that the push past R15 to the dollar was driven by news around the US Federal Reserve, with the US-China trade war also putting pressure on markets.
“With Donald Trump’s efforts to put pressure on the Federal Reserve Bank coming into focus – and the public rebuke by all four living former Fed chairs which defended its independence in a Wall Street Journal opinion piece – an emerging market sell-off has hit the local unit,” she said.
“Strong US economic data has seen the Fed turn hawkish, to the vocal dismay of Trump. Unsettled investors are turning to safe haven assets with EM currencies bearing the brunt of the risk-off environment.
“This has only served to add fuel to the fire of an already fragile situation as the trade war continues unabated while global growth fears are further driving uncertainty,” Botes said.
The rand broke through the key R15.00 support level to reach R15.09 by close of business.