The rand fell past R19/US$ for the first time in three years as investors fretted over the country’s struggles with energy shortages and China’s growth hiccups.
The currency, one of the most liquid in emerging markets, dropped as much to as low as R19.32/$, cementing its place as the second worst performing among developing nation peers this year. Traders are now watching whether it will extend its losses all the way to R19.35, its record low.
The rand also lost big ground to the pound, touching as low as R24.26 to the British currency. The euro also climbed against the South African currency, with the rand touching R21.10/€ at around lunchtime on Thursday.
South African assets are being buffeted by both external and internal factors at a time when mixed data from China have put paid to hopes of a smooth and straight-line recovery in the world’s largest economy. China is the biggest buyer of South Africa’s exports.
Meanwhile, concerns over South Africa’s continuing power supply crisis are also weighing on the rand. The shortages have seen the Reserve Bank, along with other authorities, lower growth projections for 2023 to near-zero.
Elsewhere, expectations of a pause in US Federal Reserve monetary tightening have resurfaced, but many investors are warning that bets for a rate cut this year may be too optimistic. While US inflation has moderated, price pressures still remain higher than historical levels. — (c) 2023 Bloomberg LP, with additional reporting (c) 2023 NewsCentral Media