South Africa\u2019s rand slumped to a fresh record low against the dollar on a combination of worsening diplomatic tensions and economic risks.<\/p>\n
The rand dropped as much as 1% to 19.87 per dollar on 30 May 2023, making it the worst performer this month among emerging markets. Its slide this year, only topped by the Argentine peso, is leading traders to look at an unprecedented breach of R20 to the US dollar.<\/p>\n
The latest setback for investors is the government\u2019s plan to provide diplomatic immunity to attendees of BRICS meetings as it prepares to host Russian President Vladimir Putin at an August summit.<\/p>\n
This has added to power cuts that continue to hurt the economy, concerns over China\u2019s growth, and renewed gains in the US dollar.<\/p>\n
\u201cThe rand market trades with a sense of inevitability about currency weakness,\u201d said Robert Hoodless, head of currency analysis at InTouch Capital Markets, adding that technically, the 20.2480 level looks important to hold this quarter.<\/p>\n
\u201cFX hedging has become a more sensitive subject, with many now simply looking for safety,\u201d he said.<\/p>\n
The headlines around diplomatic immunity have \u201cadded to the sense of confusion and uncertainty\u201d around South Africa\u2019s brand, said Hoodless.<\/p>\n
While the government says immunity is a routine practice, Pretoria\u2019s relations with Moscow have been a source of contention with investors, especially after a row erupted with the US this month over arms shipments.<\/p>\n
The country\u2019s energy crisis is also showing no signs of easing. Eskom ramped up power cuts on Monday due to delays in returning generating units back to service.<\/p>\n
Tiger Brands shares fell the most since August 1998 as the company flagged the negative effect on its operations from rolling blackouts and the impact of a weakening local currency.<\/p>\n
The global environment isn\u2019t helping, with traders fretting over growth in China, the biggest buyer of South African commodity exports.<\/p>\n
The rand\u2019s fortunes depend to a large extent on the outlook for the world\u2019s second-biggest economy. Meanwhile, the dollar has charged higher this month on the prospect of more Federal Reserve interest-rate hikes.<\/p>\n