Rand slides on stronger dollar and delta variant worries

The rand reached five-month highs against the dollar on Friday (20 August) amid continued US dollar strength and international concerns around the delta Covid-19 variant.

The rand, along with its emerging-market peers, traded weaker as the Federal Open Market Committee (FOMC) minutes provided the catalyst for a resurgent US dollar, Nedbank said in a research note.

“The local unit breached above its initial short-term technical resistance level around the R15.10 dollar level. On the top side, the next meaningful technical resistance level is around the R15.50 level.”

This was echoed by André Cilliers, currency strategist at TreasuryONE, who said that the weak emerging market sentiment has continued following the FOMC minutes of Wednesday and renewed fears that the delta variant can cause lockdowns, slowing global growth.

“Global growth is critical for emerging markets to thrive, and suppressed growth will be negative for emerging markets. The rand is still the weakest emerging market currency, and it feels that the momentum is for emerging markets to continue to remain a little weak in the short term.”

While markets have largely anticipated that the US Fed would start looking at tapering its asset purchases, there has been little confirmation of when, up until now, said Bianca Botes, director of Citadel Global.

“A reduction in asset purchases usually boosts the dollar as there will be less cash injected into the financial system,” she said.

The rand was trading at the following levels against the major currencies at 10h45 on Friday (20 August):

  • Dollar/Rand: R15.35 (+0.92%)
  • Pound/Rand: R20.92 (+0.89%)
  • Euro/Rand: R17.91 (+0.87%)

Read: South Africans hammered by 500 days of lockdown

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Rand slides on stronger dollar and delta variant worries