Rand slides again as the dollar rebounds

The rand was on a slippery slope again in mid-morning trade on Wednesday, after briefly strengthening through R14 to the dollar for the first time in just more than two weeks.

The retreat in the rand coincides with the rebound in the dollar, which has traded fairly erratically in recent sessions.

The Turkish lira was also much weaker in early trade, after a relative calm over the past week — potentially contributing to the drop in the value of the rand.

The weaker rand has the potential to fuel inflation, which could force the Reserve Bank to raise interest rates at a time when the local economy is punching below its weight.

“We’d caution against becoming too optimistic for a sustained recovery in risk sentiment with emerging markets’ FX volatility, as measured by JP Morgan, at a nine-year high relative to G7 currencies,” said Nema Ramkhelawan-Bhana, analyst at Rand Merchant Bank.

“Even though concerns over possible contagion from Turkey have eased, there is simply far too much event risk at play: the US appears to have sidelined talks with China in favour of solidifying an accord with Mexico and Canada, while Moody’s downgraded 20 of Turkey’s financial institutions, warning that the worst is still to come. Expect trade to be choppy today.”

At 10.54am, the rand was at R14.3832 to the dollar, from R14.2300. It was at R16.7927 to the euro from R16.6407 and at R18.5324 to the pound from R18.3102.

South African bonds were weaker too, with the yield on the benchmark R186 rising to 8.930%, from 8.865% at its last settlement on Tuesday.

Source: businesslive.co.za