Rand touches R15/$ for the second time in a week

The rand briefly weakened through the symbolic R15 to the dollar level just before lunchtime on Friday, stretching its week-to-date declines to just more than 6%.

This made it the worst-performing currency among emerging-market currencies over a five-day period.

It was not immediately clear what caused the sudden slide in the rand, which weakened as much as 2% against the dollar and substantially against the euro and pound, before pulling back slightly.

The Turkish lira also reversed course to trade just more than 4% weaker against the dollar, showing fluidity in financial markets.

The sharp decline in the value of the rand echoed the data compiled by Institute of International Finance (IIF), showing that SA and China in particular felt the acute pain of the recent sell-off in emerging markets.

SA accounted for $600m of the $1.3bn that investors have pulled from emerging markets since last Friday, according to the Washington-based IIF.

The weaker currency has the potential to cancel out the net positive effect of lower oil prices, meaning consumers are less likely to get a reprieve from high fuel prices, which have risen about 11% in 2018.

While the recent negative global backdrop, which included concern about the Turkish economic crisis, hit the rand, local economic dynamics have influenced the value of the local currency.

Earlier in the week, local retail sales undershot market expectations, fuelling concerns that SA’s economy could have slipped into a technical recession, defined as two successive quarters of economic contraction.

If it plays out, the scenario will be a blow to the “new dawn” narrative championed by President Cyril Ramaphosa.

Earlier in the year, markets had rallied in anticipation of better economic prospects under Ramaphosa. At the time, optimism was reflected in huge net equity inflows in particular, which helped to push many of the stocks to record highs on the JSE.

But since then, optimism has given way to caution; net equity inflows have slowed to a trickle while foreigners have turned into net sellers of local bonds due to changes in global risk perceptions.

According to JSE data, so far foreigners have bought just more than R8.5bn worth of local shares in 2018 while selling a net R32.4bn worth of local bonds over the same period.

At 11.36am, the rand was at R14.9153 the dollar, after weakening to session lows of R15.0027/$