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

Fortress Russia’s economy is crumbling
Global Economy

Fortress Russia’s economy is crumbling

Vladimir Putin invaded Ukraine in the belief that the Russian economy could withstand whatever the West threw at it. That belief is being severely tes…
12 Jun 2022
Shrinking credibility leaves sterling resembling an emerging-market currency
Currencies

Shrinking credibility leaves sterling resembling an emerging-market currency

UK monetary policy and the effects of Brexit are undermining confidence in sterling – it is increasingly resembling an emerging-market currency.
8 Jun 2022
What the UK’s no-confidence vote means for the pound
Currencies

What the UK’s no-confidence vote means for the pound

Boris Johnson is to face a vote of confidence in Parliament after a group of Conservative MPs turned against him. Saloni Sardana looks at what it migh…
6 Jun 2022
Why the outlook for emerging markets is improving after years of underperformance
Investments

Why the outlook for emerging markets is improving after years of underperformance

Emerging markets have underperformed over the past decade. Alex Rankine explains what the outlook is.
5 Jun 2022

Most Popular

Market crash: have we hit bottom or is there worse to come?
Stockmarkets

Market crash: have we hit bottom or is there worse to come?

For a little while, markets looked like they were about to embark on a full-on crash. And that could still happen, says Dominic Frisby. Today, he look…
27 Jun 2022
Interest rates are rising, here are the best savings accounts on the market
Savings

Interest rates are rising, here are the best savings accounts on the market

With inflation at more than 9%, your savings are not going to keep pace with the rising cost of living. But you can at least slow the rate at which yo…
24 Jun 2022
Prepare your portfolio for recession
Investment strategy

Prepare your portfolio for recession

A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, sa…
27 Jun 2022