Rand slumps 2% to worse than R13.50 to a resurgent dollar

The rand was significantly weaker against major global currencies on Thursday afternoon, in line with most emerging markets, as a dollar rally weighed on global risk assets.

The rand hit an intraday low of R13.5108 to the dollar, a 2% drop from Wednesday’s close, and 45c from Tuesday’s best level of R13.0797.

The local currency weakened sharply late on Tuesday, when ANC President Cyril Ramaphosa announced the party had agreed constitutional changes to give effect to land expropriation where necessary.

The dollar found support on Thursday from a bullish assessment of the US economy by the Federal Reserve on Wednesday night. The prospect of new tariffs by the US against China also supported the dollar.

With the more hawkish tilt in the Fed’s tone currently being priced into the market, on a near-term basis the rand could move weaker towards R13.50/$, said Investec chief economist Annabel Bishop. Volatility should persist, and as the third quarter continues, the risk of a move towards R14/$ remains.

All of the rand’s emerging-market peers were weaker on Thursday, with the rand’s losses exceeding even that of the Turkish lira, which earlier reached a record low to the dollar.

On Thursday the US imposed new sanctions against various Turkish government ministers, fuelling concerns that additional measures, and countermeasures, were in the offing, Dow Jones Newswires reported. The Turkish lira has recently been under pressure from rising inflation and growing scepticism regarding the independence of that country’s central bank.

The rand’s losses were most subdued against sterling on Thursday, despite the Bank of England earlier raising interest rates by 25 basis points, in a unanimous decision.

At 3pm, the rand was 1.34% lower to the dollar at R13.4072 from R13.2298. It was at R15.5863 to the euro from R15.4305 and at R17.4941 to the pound from R17.3587. The euro was at $1.625 from $1.1661.

At the same time the yield on the benchmark 10-year government bond was at 8.69% from 8.61%, while the R207 was at 7.475% from 7.415%.