Rand slumps to worst level since March

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Paula Luckhoff

68 days ago
Rand slumps to worst level since March Picture: 123rf

The notoriously volatile rand slumped to its lowest level in five months on Thursday.

The local currency pushed past R15 to the US dollar for the first time since March.

RELATED: Rand falls to lowest level in 2 months: 'Unrest effect not easily quantifiable'

The US currency started to climb after the Federal Reserve released minutes of it July meeting, indicating a preference for reducing monetary stimulus.

Why is the rand the worst-performing currency among emerging markets at the moment? asks Bruce Whitfield.

He talks to Matete Thulare, Head of Foreign Exchange Execution at Rand Merchant Bank (RMB).

That's why we call it the rattlesnake, because you never know when the rand will bite you!

Matete Thulare, Head of FX Execution - Rand Merchant Bank

Thulare says the currency has seen a really turbulent start to "a typically unreceptive" August month.

We've just hit the weakest level we've seen in about five months and I think predominantly it's over the last couple of days we've really been dominated by a lot of geopolitical tension, softer Chinese data...

Matete Thulare, Head of FX Execution - Rand Merchant Bank

Thulare highlights the effect of the Fed's minutes which led to the rand weakening further.

Whilst you look at the minutes, they're implying a tightening of policy but they don't actually point towards an imminent rates hike...

Matete Thulare, Head of FX Execution - Rand Merchant Bank

I suppose this is where the US indicated that they're starting to have a willingness to cut asset purchases before the end of 2021 and this brings about memories of 2013... Already some of the Fed members have expressed a concern over inflation...

Matete Thulare, Head of FX Execution - Rand Merchant Bank

This also heightens speculation that possibly US interest rates may be hiked sooner rather than later. Obviously we did see them cut interest rates last year in a bid to soften the pandemic's economic blow... I suppose the focus now shifts to Jackson Hole next week where the Fed's Jerome Powell's keynote address will be really scrutinised...

Matete Thulare, Head of FX Execution - Rand Merchant Bank

Another factor to take into account is concern around the Covid Delta strain as a threat to global economic recovery, he says.

Listen to the discussion on The Money Show:

This article first appeared on CapeTalk : Rand slumps to worst level since March

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