Rand set for worst monthly performance in two years

The rand stabilised a little on Friday morning, but headed for a big drop on the month, which has proved rocky for emerging-market currencies in particular.

“The patient has deteriorated, and the diagnosis is confirmed: it’s contagious,” said Rand Merchant Bank analyst Nema Ramkhelawan-Bhana in an e-mailed note to clients.

“Like an outbreak of measles, the brutal sell off in Argentina and Turkey has spread to other emerging markets, with the affliction resulting in a 1.3% drop in the MSCI EM [emerging market] index.”

She was referring to the rand, which suffered collateral damage as Argentina’s central bank failed to arrest the slide in the peso currency with an aggressive hike interest rates.

The Turkish lira has battled for the better part of the week to settle down, after Moody’s downgraded 20 of the country’s financial institutions, hurting sentiment towards emerging markets as an asset class.

For consumers, the effect of the rand’s slide will be felt at the fuel pump next week. Extrapolating figures from Central Energy Fund, the AA said on Thursday that the petrol price was likely to increase between 23c/l and 25c/l in September.