The rand was a lot weaker on Wednesday morning‚ as the dollar built on its recent gains against a host of currencies amid chances of an increase in US interest rates by year-end.
The latest impetus for the greenback came from the US Federal Reserve chairwoman Janet Yellen‚ who on Tuesday reaffirmed the commitment to gradually increase the rates despite inflation running below its 2% target range.
Higher rates in the US tend to affect fund flows to emerging markets — a point raised by Reserve Bank governor Lesetja Kganyago last week when he chose to keep local rates on hold.
Yield-seeking foreigners have bought a net R70.4bn worth of local bonds so far in 2017‚ according to the JSE data.
“We warned last month that the rand may be the so-called ‘canary in a coal mine’ for EM [emerging markets] and needs to be watched closely‚” said Win Thin‚ global head of emerging market currency strategy at Brown Brothers Harriman.
“We focus on the rand because we think it has been one of the biggest beneficiaries of the quest for yield by investors. Yet the rand has always been one of our least favourite EM currencies. SA comes with very weak fundamentals‚ as well as heightened political and downgrade risks.”
As recently as three weeks ago‚ the rand bought a single dollar R12.74 before weakening sharply as the dollar strengthened.
At 9.26am‚ the rand was at R13.4683 to the dollar from R13.3774‚ at R15.8222 to the euro from R15.7772 and at R18.0159 to the pound from R18.0053.
The euro was at $1.1748 from $1.1783.
by Andries Mahlangu -BusinessLIVE