South African Rand Hit Fourteen Year Low Against the U.S Dollar
On Friday, the rand dropped to its fourteen year low against the US dollar. It resulted from a wider sell off of the emerging market currencies due to tumbling commodity prices and concerns over the slowdown in China's economic activities.
The rand dropped greater than 1.5 percent to R12.68 to the U.S dollar. It is lowest since the 2001 December crash when it had touched R13.85/$.
A day prior, the Reserve Bank decided to raise the repo rate 25 basis points to 6.0 percent but the slide against the dollar did away with the modest gains.
The global factors and not domestic issues are driving the rand which is hitting its worst fall.
It's not only the rand but all the currencies in the emerging markets posted their largest stretch of weekly losses from the beginning of this year. The Brazilian real was hit harder than the rand. It dropped 1.9 percent against the U.S dollar.
Christopher Shiells , N IGM analyst said, "Broadly it is just risk-off across emerging markets. There's nothing specifically SA-related, but the rand is being targeted as it's still seen as more sensitive to the big external risks."
The trigger that led to the greater drop in the value of the currencies was the news that there was a negative move in the China's factory sector this month. The purchasing managers' index fell to a low of fifteen months with 48.2 index points. Anything below fifty indicates contraction.
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