Rand plunges towards R15/$ as emerging-market woes continue

The rand was heading towards R15 to the dollar on Monday afternoon in what is expected to be another challenging week for the local currency.

A slight recovery in the euro supported the rand, but the outlook remained negative for the local currency, analysts said.

Negative sentiment towards emerging markets shows little sign of abating, with the Turkish lira down another 0.9% against the dollar, although recovering somewhat from deeper losses earlier in day.

This was after the Turkish central bank said it would again take the “necessary action to support price stability” at its September policy meeting.

New economic data showed that Turkish inflation in August rose to almost 18%, albeit a slightly lower figure than investors were expecting.

The Argentinian peso was broadly flat.

Trading remains jittery as the odds are that US President Donald Trump will announce the expansion of tariffs on Chinese goods from $50bn to $200bn on Thursday.

“Asian markets have been declining for a third consecutive trading session on the fears of escalating trade tension between China and the US,” FxPro analysts said.

The rand retreated 11% against the dollar in August with not much respite expected until Tuesday, when local GDP numbers for the second quarter will be released. If growth comes in lower than the expected 0.5%, SA will technically be in recession following the first quarter’s contraction.

The pound was on the back foot against the dollar after EU trade negotiator Michel Barnier dashed hopes that his comments last week meant the EU was going to bend its rules on the single market in order to come to an agreement with the UK.

That has led to the pound’s firming above $1.30, but on Monday it lost ground to $1.2859. “A Brexit agreement looks dead in the water amid the widespread disapproval of UK Prime Minister Theresa May’s Chequers plan,” said Oanda analyst Craig Erlam.

At 3pm, the rand was at R14.913 to the dollar, from R14.665. It was at R17.3094 to the euro from R17.0331 and at R19.1752 to the pound from R18.9761.

The euro was at $1.1606 from $1.1597.

Local bonds remained under pressure, with nonresidents net sellers to the value of R4.4bn over the past week, bringing total net sales to just more than R47bn in 2018.

The yield on the benchmark R186 bond was last bid at 9.015%, from 8.97% on Friday.

The US 10-year treasury was unchanged at 2.8603% as the US celebrates a public holiday.