Tanzania invites bids for logging of Selous Game Reserve
A five rand coin. Picture: Reuters
The rand fell to a fresh six-month low against the dollar on Friday morning, at the end of another bruising week, which included shocking local GDP figures.
The rand’s deterioration caught many off guard, especially given that a dollar was trading weaker on global markets.
TreasuryOne senior currency dealer Andre Botha tracked the moves to “whispers” in the market about a big deal going through the market, coupled with technical factors such as a trigger in stop loss orders.
“With the rand already on the back-foot after the GDP data that was released earlier in the week, momentum was stacked against any rand recovery once the slide began.”
The rand has lost nearly 4% of its value against the greenback since Thursday afternoon.
The weaker currency has a potential to stoke inflation, which is likely to put the Reserve Bank in a tight spot, given the low growth environment.
The local economy contracted by 2.2%, much more than expected, in the first quarter, prompting some economists to revise down their growth forecast for the year.
The Bank’s monetary policy committee held its repurchase rate steady at 6.5% in May, warning that consumer prices were likely to rise in the coming months in light of the volatile rand, higher oil prices and the increase in value added tax (VAT).
“There is no real justification for the blowout in the rand as far as it did, though the backdrop in emerging markets is not favourable,” said Halen Bothma, market analyst at ETM Analytics.
Local bonds also fell sharply in sympathy with the rand. The yield on the benchmark R186 bond crossed the 9% mark for the first time since mid-December.
At 9.34am, the rand was at R13.2064 to the dollar from R13.0246, R15.5496 to the euro from R15.3633 and R17.7122 to the pound from R17.4768. The euro was at $1.1775 from $1.1798.