South Africa's rand on the slide

The rand has resumed its slide against the dollar – don't expect a recovery anytime soon.

After a breather lasting a few months, the South African rand has resumed its slide against the dollar. It has now lost 13% against the greenback this year, and is close to a five-year low around R11. Don't expect a sustained recovery any time soon.

"The great dollar rally of 2014 drives everything before it," says John Cairns of Rand Merchant Bank. Higher US interest rates mean that liquidity leaves risky emerging economies and heads back to the US.

That's especially awkward for states with large external, or current account, deficits: these must be covered with foreign capital. South Africa's current-account deficit has reached 6.2% of GDP. Jitters over higher US interest rates caused rand weakness last year and in early 2014.

But there are other factors weighing on the rand, says the FT's Andrew England. The economy's momentum has sagged amid reduced demand for commodities and strikes in the mining sector. So there is scant scope for higher interest rates to entice foreign money back into the economy.

Uncertainty over the identity of the next governor of the central bank, the South African Reserve Bank, and whether he or she might be susceptible to political interference, isn't helping either. The rand sell-off is set to continue.

Recommended

The charts that matter: the start of the big crash?
Global Economy

The charts that matter: the start of the big crash?

US tech stocks fell further this week, more than 10% down on their November high. There’s what happened to the charts that matter most to the global e…
22 Jan 2022
Russian stocks suffer as the world fears it will invade Ukraine
European stockmarkets

Russian stocks suffer as the world fears it will invade Ukraine

Despite a booming economy, Russian stocks look extraordinarily cheap – but if it invades Ukraine, the Russian stockmarket will become all but uninvest…
14 Jan 2022
US inflation is at its highest since 1982. Why aren’t markets panicking?
Inflation

US inflation is at its highest since 1982. Why aren’t markets panicking?

US inflation is at 7% – the last time it was this high interest rates were at 14%. But instead of panicking, markets just shrugged. John Stepek explai…
13 Jan 2022
Bitcoin’s new year is off to a bad start – what does the rest of 2022 hold?
Bitcoin & crypto

Bitcoin’s new year is off to a bad start – what does the rest of 2022 hold?

Bitcoin has had its worst-ever start to a year. But it remains the “future of money”, says Dominic Frisby. Here, he looks at what might come next for …
12 Jan 2022

Most Popular

Ask for a pay rise – everyone else is
Inflation

Ask for a pay rise – everyone else is

As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why yo…
17 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022
US inflation is at its highest since 1982. Why aren’t markets panicking?
Inflation

US inflation is at its highest since 1982. Why aren’t markets panicking?

US inflation is at 7% – the last time it was this high interest rates were at 14%. But instead of panicking, markets just shrugged. John Stepek explai…
13 Jan 2022