File Photo: IOL
File Photo: IOL

What factors are putting the rand under heavy pressure?

By MAYIBONGWE MAQHINA Time of article published Aug 13, 2019

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JOHANNESBURG -  Economists have warned that there are a number of factors could have led to the rand currently being under tremendous pressure.

Dawie Roodt said there were developments that were pretty much negative both domestically and internationally that were contributing factors.

Business Report reported on Tuesday that the rand fell to a fresh 2019 low against the dollar on Monday, breaching the R15.40 mark against the greenback while also weakening ­­­­­­­­significantly against other major currencies as the trade war between Beijing and Washington showed no signs of letting up.

It said the domestic currency reached a day’s low of R15.46 against the dollar, R17.30 against the euro and R18.68 against the pound, bearing the brunt of emerging market currency declines since the trade tiff between the world’s two biggest economies re-emerged this month.

Roodt said the likelihood of Eskom debt being eventually moved to state books was one of the reasons.

"It simply means the chances of a downgrade has substantially increased. In fact, it is a given that South Africa will see a downgrade," he said.

Roodt also said the announcement on plans to move ahead with the National Health Insurance, which he felt was unaffordable, affected the domestic currency. 

He added that political developments that suggested that President Cyril Ramphosa was battling to consolidate his power also played a role.

"That is a factor I believe contributed to the weak currency."

Roodt was optimistic that the rand would improve when the exchange rate is done.

"I won't be surprised if we see the rand coming back in a couple of weeks or so. The South African rand is very vulnerable and will be affected by developments internationally and locally."

Asked about the reports on the CR17 emails and financial statements, Roodt said: "I believe things like the leaks of financial statement and the president fighting with the Public Protector - all those factors contributed to a perception that the president is a weak president."


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