THE RAND headed for its biggest drop against the dollar since 2016, according to Bloomberg, buffeted by headwinds including a downbeat assessment of the economy by Moody’s Investors Service and a plunge in the biggest company on the JSE.
Moody’s report, “Government of South Africa: Fiscal slippages likely this year, but medium-term targets remain within reach”, found that the pace of South Africa’s fiscal consolidation would be slower than government forecast as weaker than expected economic growth and a rising public sector wage bill acted as fiscal headwinds.
Moody’s Vice President and co-author of the report said: “Growth this year is expected to be lower than the government's own estimates, weighing on tax revenues, while the public sector wage agreement in June also brings extra, unbudgeted costs.”
The rand gave up 3.4 percent after this revelation, which was made after SA Reserve Bank Governor Lesetja Kganyago said he was worried about the country’s growth projections.
At 5pm the domestic currency was bid 37c weaker than Tuesday’s same time bid at R14.57 a dollar. Against the pound sterling the rand was 40c softer at R18.51 and to the euro, the currency declined 37c to R16.53.
Corporate treasury manager at Peregrine Treasury Solutions, Bianca Botes, said the dollar gained strong momentum during overnight trading, lingering at its strongest in 13 months high, as gold declined to its weakest in 18 months, mostly driven by a weak euro compared to the USD.
“Emerging market currencies tracked the euro and commodities lower, with the rand once again trading in the R14.45-a-dollar region. This followed a robust rebound in both the rand and the Turkish lira as the Turkish central bank dropped liquidity requirements to assist with the struggling market.”